The company reports third-quarter revenue of $34.15 billion, exceeding the anticipated $33.56 billion, resulting in a spike in shares during after-hours trading
In its third-quarter earnings report, Meta exceeded analysts’ projections, reaffirming investor confidence in the tech company, which had faced turbulence in recent years. CEO Mark Zuckerberg highlighted that the company achieved its “highest operating margin in two years.”
The company revealed a third-quarter revenue of $34.15 billion, surpassing the expected $33.56 billion, indicating a 23% year-over-year increase. Following this report, the company’s shares saw an uptick in after-hours trading, boosting investor morale. This positive outcome comes after Meta navigated through several years of uncertainty while reshaping its business model and expanding beyond its original social media-focused empire, with advertising remaining the primary revenue driver.
Zuckerberg mentioned a 7% increase in the total time users spent on Facebook and a 6% rise in time dedicated to Instagram. This growth was attributed to improvements in content recommendations, stemming from the company’s heightened focus on algorithmically suggesting content to users.
Reels, Meta’s short-form video platform, has led to a 40% increase in the time users spend on Instagram since its launch, and according to Zuckerberg, it continues to perform exceptionally well. He anticipates that engaging with businesses, likely with the assistance of artificial intelligence, will be the next key focus of their business strategy.
Similar to many tech firms, Meta has actively embraced the rising trend of artificial intelligence, with recent financial reports placing a strong emphasis on AI tools. The robust results in Meta’s recent report demonstrate that these efforts are producing significant returns, as noted by Jesse Cohen, a senior analyst at Investing.com, who characterized it as an outstanding quarter for the tech company.
Cohen commented, “Meta not only surpassed expectations in terms of both earnings per share and revenue, but it did so by a considerable margin. The social media company is reaping the rewards of its expanding user base, the growing adoption of Reels, and its innovative AI initiatives.”
This report marks Meta’s most lucrative quarter in years, building on two preceding quarters that had already exceeded expectations. Importantly, this positive news follows a significant legal challenge for Meta, the parent company of Instagram, Facebook, and WhatsApp. Just a day earlier, the company confronted a substantial lawsuit filed by attorneys general from 41 states. These states are suing Meta, alleging that the company’s social media platforms have had a detrimental impact on the mental health of young users due to the addictive nature of these platforms.
This legal challenge is the latest hurdle for Meta, as the company grapples with challenges in its core advertising business amid a broader economic downturn. Additionally, concerns have arisen about Meta’s ability to navigate the repercussions of extensive privacy changes implemented by Apple in 2021. These changes posed a threat to Meta’s core advertising business by restricting the amount of user data it can collect. Furthermore, the company faces the challenge of retaining users who are migrating to newer platforms such as TikTok.
In response to these persistent challenges, Meta has shifted its focus away from social media, investing billions of dollars in the metaverse, its virtual reality product. In the third quarter, the segment responsible for developing its virtual reality products, Reality Labs, incurred losses of $3.7 billion, accumulating losses exceeding $21 billion since the beginning of last year.
Despite these substantial losses, Zuckerberg reiterated his commitment to the metaverse project, emphasizing that it remains a significant long-term priority. He explained that Meta anticipates a significant year-over-year increase in operating losses for Reality Labs as the company continues to develop more hardware and invest in expanding the ecosystem.
In September, the company unveiled the Quest 3, the latest version of its virtual reality headset. Zuckerberg reported positive early reviews during an investor call on Wednesday, noting the product is available for purchase at a retail price of $499.
In addition to the Quest 3, Meta introduced several new products in the current quarter, including updated Ray-Ban smart glasses, which have been well-received. They also launched an AI studio that utilizes artificial intelligence to enable businesses to customize chatbots.
For the fourth quarter, Meta projected strong revenue in its guidance, suggesting potential stabilization after a tumultuous period marked by significant layoffs, boosting investor confidence.
Zuckerberg mentioned on Wednesday that Meta is currently dealing with a substantial backlog of hiring and plans to increase hiring efforts in 2024, despite the company’s long-term strategy of reducing its headcount.
Most new hires will align with the company’s objective of expanding investments in artificial intelligence, according to Meta’s Chief Financial Officer, Susan Li. Increased payroll expenses are anticipated as Meta continues to shift its workforce composition toward more technically demanding roles.
Notably, there was limited discussion about Threads, the Twitter competitor introduced by Meta earlier this year. Although the app initially attracted 100 million sign-ups within days of its launch, questions have arisen about its long-term sustainability. Zuckerberg disclosed that Threads currently has “just under” 100 million monthly active users and expressed optimism about its potential to reach the company’s target of 1 billion users in “a few more years.”