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CNN
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Meta surpassed Wall Street’s expectations once again with their Q3 earnings report, highlighting the success of their “year of efficiency” turnaround strategy. The outstanding results come after Meta completed the majority of their cost-cutting plan, which involved significant layoffs due to the challenges faced in 2022.
The parent company of Facebook reported a 23% increase in quarterly revenue compared to the previous year, surpassing analysts’ projections. Meta also doubled their profits in comparison to the same quarter last year, reaching a net income of nearly $11.6 billion.
Following the release of the earnings report, Meta’s stock experienced a 4% surge in after-hours trading. The company’s stock price had already risen by 140% year-to-date prior to the report.
“All in all, it was a blowout quarter with Meta reporting its most profitable quarter in years,” said Investing.com senior analyst Jesse Cohen in a statement.
In February, CEO Mark Zuckerberg announced Meta’s “year of efficiency” plan following a decline in revenue. The company faced difficulties due to Apple’s app privacy changes, lower ad spending, and increased competition from TikTok.
Meta experienced strong user growth on both its family of apps and the core Facebook platform. Facebook’s monthly active users increased by 3% compared to the previous year, surpassing a growth rate of 2% from the year-ago quarter.
Meta’s ad impressions across all apps grew by 31% in the September quarter, while the average price per ad decreased by 6% compared to the previous year. However, the rate of decline was slower than in the same period last year, which saw an 18% decrease in average price per ad.
Meta has been investing in artificial intelligence to enhance ad targeting and monetize its popular Reels feature on Instagram. CEO Mark Zuckerberg stated that Reels has become a core part of Meta’s apps.
As the macroeconomic outlook stabilizes, advertisers are returning to higher spending, benefiting Meta and other market leaders such as Facebook and Instagram.
Snap, another social media platform, reported a temporary pause in ad spending due to the Israel-Hamas conflict. Meta also noted a softer ad spend in the early part of Q4, but it’s challenging to attribute this to any specific geopolitical event.
Meta is currently facing legal challenges, including a lawsuit accusing the company of negatively impacting young users’ mental health. However, Meta has implemented tools to support teens and their families in response to these allegations.
The company has been investing heavily in its Reality Labs unit, which focuses on their metaverse efforts. Reality Labs reported a loss of over $3.7 billion in the September quarter. Despite revising down their 2023 expense guidance, Meta expects the full-year operating losses of Reality Lab to increase in both 2023 and 2024.
Meta projects a year-over-year revenue growth between 13.5% and 24% for the final quarter of 2023.
Zuckerberg emphasized that Meta’s focus on efficiency will remain unchanged. The company achieved its highest operating margin in two years during the September quarter. AI is set to be Meta’s primary investment area in 2024.
Zuckerberg revealed that Meta’s competitor to Twitter, called Threads, has nearly 100 million monthly active users. He believes the platform has the potential to reach 1 billion users if it continues to grow over the next few years.
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