Meta’s Third-Quarter Earnings Show Mixed Results with a Cautionary Outlook 📊
In its latest earnings report for the third quarter, Meta has revealed user engagement numbers that fell short of market expectations while flagging substantial infrastructure costs anticipated for 2025. Despite the disappointing user figures, the company’s earnings per share and revenue exceeded forecasts, yet this prompted a slight dip in the stock price during after-hours trading.
Financial Performance Overview 📈
Meta’s latest report compares its actual results with Wall Street’s predictions, highlighting the following key figures:
- Earnings per Share: $6.03 compared to the expected $5.25
- Total Revenue: $40.59 billion versus an anticipated $40.29 billion
Over the third quarter, sales surged by 19% year-over-year, and net profit rose 35% to $15.7 billion, up from $11.6 billion during the same period last year. However, this growth marks the slowest year-over-year increase in net income observed since the second quarter of this year.
User Engagement and Expectations 📅
Meta recorded 3.29 billion daily active users, showing a 5% annual growth, yet this figure did not meet the analyst expectations of 3.31 billion.
The company has updated its capital expenditure projections for the fiscal year 2024 to a range between $38 billion and $40 billion, which is an increase from the prior estimate of $37 billion to $40 billion. Furthermore, Meta anticipates that capital expenditures will continue to rise significantly in 2025 due to a surge in infrastructure-related expenses.
Investments in Artificial Intelligence ⚙️
Mark Zuckerberg, Meta’s CEO, stated during the analyst call that the company’s ongoing investments in artificial intelligence require substantial infrastructure, suggesting that these investments will persist and grow. Zuckerberg emphasized the critical nature of these investments, which include spending on cutting-edge graphics processing units (GPUs) from Nvidia, playing a significant role in enhancing the company’s core online advertising capabilities after the privacy updates imposed by Apple in 2021.
Over one million advertisers have utilized Meta’s generative AI advertising tools, indicating strong engagement with these new technological offerings.
Expense Projections and Advertising Revenue 💰
Meta has estimated total expenses for the 2024 fiscal year to range between $96 billion and $98 billion, slightly lower than the earlier guidance of $96 billion to $99 billion.
In terms of advertising performance, Meta reported a revenue of $39.9 billion for the quarter, marking an 18.7% increase compared to the previous year. Advertising made up a staggering 98.3% of Meta’s total revenue in the third quarter.
Regional Growth Analysis 🌍
The Asia-Pacific region saw a 15% growth in revenue, which has become the slowest-growing area for the company. Chief Financial Officer Susan Li attributed this slowdown, which declined from a 28% increase in the previous quarter, to a decrease in demand from Chinese advertisers. Concerns have arisen regarding decreased digital advertising expenditures among online retailers linked to China, like Temu and Shein, potentially impacting Meta’s overall revenue.
Looking ahead, Meta anticipates fourth-quarter revenue to fall between $45 billion and $48 billion, outpacing analyst consensus which stands at $46.3 billion.
Reality Labs Update 📉
The Reality Labs hardware division reported an operating loss of $4.4 billion for the third quarter, which was less than the projected loss of $4.68 billion. Sales in this segment increased by 29% year-on-year to $270 million, although this fell short of the expected $310.4 million.
Since 2020, the Reality Labs unit has accrued operational losses exceeding $58 billion.
Workforce Developments 👥
As of September 30, Meta’s total workforce grew by 9% from the previous year, totaling 72,404 employees.
The results released by Meta come just after quarterly earnings reports from other digital advertising firms such as Alphabet, Reddit, and Snap, which demonstrated solid performance. Additionally, Microsoft announced that its third-quarter earnings surpassed expectations for both revenue and profit.
With attention now shifting as major players like Apple and Amazon plan to release their quarterly financial data shortly, the market remains vigilant about ongoing trends in digital advertising and technological advancements.
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