Meta Shares Rise As Earnings Top Expectations

AFP/APP

San Francisco: Meta on Wednesday reported a profit of $13.5 billion for the recently ended quarter, surpassing market expectations and leading to a significant jump in its share price.

Meta, the parent company of Facebook and Instagram, announced quarterly revenue of $39 billion, a 22 percent increase compared to the same period last year.

“We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year,” said Meta founder and CEO Mark Zuckerberg.

Following the earnings release, Meta shares surged more than four percent, reaching $495.30 in after-market trading.

Despite the impressive profit, Meta’s Reality Labs unit, which focuses on virtual and augmented reality products, reported a loss of $4.5 billion, exceeding analysts’ expectations.

Overall, Meta’s costs increased by seven percent to $24.22 billion compared to the previous year, as the company competes with Microsoft, Google, and other tech giants to lead in artificial intelligence.

“We’ve released the first frontier-level open source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses, and we’re driving good growth across our apps,” Zuckerberg added.

Zuckerberg has become an advocate for open source technology in AI development, positioning himself against competitors like OpenAI and Google. He recently articulated his vision in an open letter titled “Open Source AI is the Path Forward.”

Meta reported an average of 3.27 billion people using at least one of its apps, including WhatsApp, Instagram, and Facebook.

Ad views for the quarter were up by 10 percent compared to the previous year, with the average ad price also increasing by a similar percentage.

“Any apprehensions investors may have had about Meta’s spending on AI and the metaverse are likely to be allayed by this quarter’s results,” said eMarketer principal analyst Max Willens. “Meta’s careful introduction of ads on Reels has led to a perfect storm of rising impressions and rising ad prices.”

Willens added that Meta investors should be confident in the company’s “vigorous investments in its plans for the future.”

Reels is Meta’s short video sharing service launched to compete with TikTok, which faces potential bans in the United States under new legislation.

Additionally, Meta might start selling ads on Threads, its text messaging platform similar to X (formerly Twitter), by the end of the year, which could further boost its business.

Meta’s rebound in 2023, following drastic cost-cutting measures including significant layoffs in what Zuckerberg termed the “year of efficiency,” continued with this strong financial performance. The company’s global workforce now stands at 70,799, reduced from last quarter and down from a peak of over 87,000 employees in 2022.

Zuckerberg has encouraged investors to be patient as the company ventures into AI, acknowledging that introducing new products before they become profitable has historically led to stock volatility.