Meta, the social media conglomerate, reported its second-quarter earnings on Wednesday, encouraging investors as massive results from its advertising business outweighed the mounting losses from its more ambitious non-social media ventures.
The Facebook parent posted a solid spring quarter, exceeding both earnings and revenue expectations. Meta’s second-quarter earnings soared 73% to $13.5 billion, or $5.16 per share, surpassing estimates of $4.80 per share. Revenue rose 22% to $39.1 billion, beating analysts’ consensus of $38.3 billion. Meanwhile, costs only increased by 7%, expanding the profit margin.
Following this news, Meta stock surged 7% in after-hours trading and continued its growth on Thursday.
However, despite a recent gain, Meta shares had declined more than 10% over the last three weeks amid a broader tech sell-off.
Here are more key numbers:
- Third-quarter revenue forecast: between $38.5 billion and $41 billion.
- Full-year expenses forecast: between $96 billion and $99 billion, in line with prior outlooks. Capital expenditures have been adjusted from $35 billion to $40 billion to $37 billion to $40 billion, as concerns about spending in the artificial intelligence arms race remain prominent among tech investors.
- Daily active users increased 7% year-on-year to 3.3 billion.
- Ad impressions increased by 10%, and ad prices rose by an average of 10%.
- $4.5 billion: quarterly loss Meta reported in its Reality Labs division, which encompasses its metaverse, or augmented and virtual reality projects. This loss adds to a total of $50 billion burned since the unit’s inception in 2020.
Despite rebranding from Facebook to Meta in October 2021 to reflect its metaverse ambitions, Meta remains fundamentally a social media company. Apps like Facebook, Instagram, and WhatsApp account for 99% of its total sales, with 99% of revenue coming from advertisements. Meta's digital ad-based model is similar to that of Google parent Alphabet, which generates about three-fourths of its revenue from ads.
Shortly after its name change, Meta stock nearly collapsed, falling almost 80% from its September 2021 peak to its November 2022 low. This decline coincided with five consecutive quarters of year-over-year profit drops, driven by a rocky macroeconomic environment that caused advertisers to cut spending and by rising expenses tied to the metaverse.
However, as Meta CEO Mark Zuckerberg cut overhead costs, including laying off 20,000 employees, profits rebounded significantly. The stock regained its strength as the company's bottom line improved. Additionally, Meta announced its first-ever quarterly dividends beginning in March, paying out $0.50 per share per quarter, signaling the Silicon Valley company’s maturation and stable cash flow.
