Meta Beats Earnings Expectations in Q3, Shares Rise
Tech giant Meta, formerly known as Facebook, reported its third-quarter earnings on Wednesday, surpassing analysts’ expectations and causing a 4% jump in after-hours trading. The company’s performance is a significant recovery from a lackluster 2022.
Meta has been navigating a challenging period, focusing on its AI-powered advertising business while expanding into virtual reality (VR) and augmented reality (AR). As the parent company of Facebook and Instagram, Meta has been strategically improving its position in the digital advertising market, which has been experiencing a prolonged slump but is now showing signs of recovery.
In Q3, Meta’s advertising revenue reached $33.64 billion, exceeding the expected $32.94 billion. The company also outperformed estimates for ad impressions, reporting a 31% increase year-over-year, compared to the anticipated 29.6%.
This strong performance has pushed Meta shares up by over 140% year-to-date, outperforming the S&P 500 and the Nasdaq Internet Index, which have seen gains of around 9% and 34% respectively.
Neuberger Bergman analyst Daniel Flax emphasized the positive outlook for Meta, saying, “If they can drive durable growth and translate that into earnings per share and free cash flow generation, I think the stock can continue to work its way higher.”
However, Meta faces legal challenges in the near future, as it confronts lawsuits brought by 42 attorneys general at the federal and state levels. The lawsuits allege that Facebook and Instagram have designed features that contribute to addiction in children.
“We’re disappointed that instead of working productively with companies across the industry to create clear, age-appropriate standards for the many apps teens use, the attorneys general have chosen this path,” commented a Meta spokesperson.
Wall Street analysts have provided diverse recommendations for Meta, with 60 buys, seven holds, and two sells.
Key Numbers for Meta’s Q3 Earnings
Here are the key numbers reported by Meta, compared to 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 CEO, Mark Zuckerberg, highlighted the company’s accomplishments in AI and mixed reality, including the launch of the Quest 3 headset, priced at $499.99. Zuckerberg stated, “We had a good quarter for our community and business” and expressed pride in the advancements made by Meta’s teams.
While Meta’s Family of Apps business, including WhatsApp, generated over $33 billion in revenue, its mixed reality division has faced controversy. Reality Labs has resulted in total losses surpassing $20 billion, with $13.7 billion incurred in 2022 alone. Meta anticipates continued losses in this segment and expects them to significantly increase in 2023.
Zuckerberg’s “Year of Efficiency” initiatives have proven successful as Meta revises its 2023 capital expenditures outlook to a range of $27 billion to $29 billion, compared to the previously announced $27 billion to $30 billion.
The recent earnings report indicates positive momentum for Meta as it strengthens its foothold in the advertising market while investing in VR and AR technologies.
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