Meta (META) reported impressive third quarter earnings, surpassing expectations in both revenue and earnings.
Following the announcement, Meta’s shares surged by up to 4% in after-hours trading, signaling a strong recovery from a lackluster 2022.
Despite facing challenges, Meta has successfully established itself as an AI-powered advertising giant while expanding into the realms of virtual reality (VR) and augmented reality (AR). The company has impressively navigated through these capital-intensive ventures.
Meta’s efforts to bolster its AI initiatives and regain its position in the digital advertising market have garnered the attention and confidence of investors. This market has endured a prolonged slump but is now showing signs of a rebound.
In Q3, Meta generated $33.64 billion in advertising revenue, surpassing the expected $32.94 billion. The company also exceeded estimates for ad impressions, demonstrating a 31% YoY increase compared to the projected 29.6%.
This year, Meta’s shares have soared by over 140%, significantly outperforming both the S&P 500 and the Nasdaq Internet Index, which have risen by approximately 9% and 34% respectively.
Analyst Daniel Flax from Neuberger Bergman expressed optimism about Meta’s future and suggested that if the company sustains its growth and translates it into earnings per share and free cash flow generation, its stock could continue to rise.
However, Meta faces the specter of legal risks as it confronts federal and state lawsuits. Forty-two attorneys general have accused Facebook and Instagram of creating addictive features targeted at children.
In response, a Meta spokesperson expressed disappointment in the attorneys general’s approach and emphasized the need for collaboration to establish clear, age-appropriate standards for the apps used by teenagers.
Wall Street analysts currently recommend 60 buys, seven holds, and two sells for Meta’s stock.
The earnings rundown
Here are the key financial figures that Meta reported, compared to Bloomberg’s analysts’ estimates:
Revenue: $34.15 billion (actual) vs. $33.52 billion (expected)
Earnings per share: $4.39 (actual) vs. $3.60 (expected)
Facebook daily active users: 2.09 billion (actual) vs. 2.07 billion (expected)
Reality Labs operating loss: $3.74 billion (actual) vs. $3.94 billion (expected)
Q4 revenue outlook: $36.5 billion-$40 billion (actual) vs. $38.76 billion (expected)
Meta’s focus on achieving greater efficiency, as exemplified by Mark Zuckerberg’s “Year of Efficiency” initiatives, has yielded positive results. The company is lowering its 2023 capital expenditures projection to a range of $27-29 billion, down from the previously announced range of $27-30 billion.
Meta’s Family of Apps, which includes WhatsApp, generated over $33 billion in revenue, with an operating income of $17.49 billion for the quarter. This surpassed analysts’ expectations of $15.23 billion.
However, Meta’s mixed reality business, Reality Labs, has faced controversy. To date, Meta has incurred losses exceeding $20 billion in running Reality Labs, $13.7 billion of which were incurred in 2022.
Meta anticipates that these losses will persist and increase significantly in 2023. The company recently launched its Quest 3 headset, priced at $499.99.
Meta CEO Mark Zuckerberg expressed satisfaction with the quarter’s performance, highlighting the company’s advancements in AI and mixed reality through the launch of Quest 3, Ray-Ban Meta smart glasses, and their AI studio.
Senior Tech Reporter Allie Garfinkle from Yahoo Finance contributed to this article.
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