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Meta Doubled Gains In September Quarter As Turnaround Effort Continues

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When Meta released its earnings for the quarter that ended in September on Wednesday, it once again outperformed Wall Street’s forecasts, providing further evidence that the company’s “year of efficiency” turnaround strategy is working. The impressive outcomes coincide with Meta’s announcement that, in the wake of a tough 2022, it had “substantially completed” the layoff phase of its cost-cutting plan.

The parent company of Facebook reported quarterly revenue gains of 23% year over year to over $34 billion, surpassing experts’ projections of $33.5 billion. Additionally, Meta reported net income of almost $11.6 billion, more than doubling its earnings from the same quarter the previous year, when its profits had decreased by half.

Following the story, shares of Meta (META) increased by as much as 4% in after-hours trading on Wednesday. By Wednesday’s close, the year-to-date gain on Meta stock was already 140%.

“All in all, it was a blowout quarter with Meta reporting its most profitable quarter in years,” Investing.com senior analyst Jesse Cohen said in a statement following the report.

After the business’s third-quarter revenue loss in February, Zuckerberg unveiled his objectives for a “year of efficiency.” The company had a rough year due to lower digital ad spending amid broader macroeconomic uncertainties and hurdles from Apple’s app privacy measures. In the face of fierce competition from rivals like TikTok, the company’s user growth has also been decreasing.

On Wednesday, Meta announced comparatively robust user growth for both its main Facebook platform and its suite of apps. Facebook’s monthly active user count increased from a 2% growth rate in the same quarter last year to over 3 billion, a 3% year-over-year increase.

Additionally, there were some encouraging signs for the company’s main advertising division. In the September quarter, ad impressions on all of Meta’s apps increased 31% year over year. Additionally, the corporation reported a 6% drop in average price per advertisement year over year. Even so, the rate of decrease is less rapid than it was during the same time last year when the average price per ad dropped 18%.

In an effort to better monetize its well-liked Reels feature on Instagram and increase return on investment for advertisers, Meta has been enhancing its ad targeting technology through the use of artificial intelligence. During a Wednesday analyst call, CEO Mark Zuckerberg stated, “Reels has graduated from being an early initiative to being a core part of our apps.”

Additionally, Meta seems to be a major winner as marketers resume increasing their spending as the macroeconomic picture slightly stabilizes.

Following the start of the Israel-Hamas conflict earlier this month, some advertisers temporarily halted their spending, according to fellow social media platform Snap, raising concerns about possible ramifications for the larger digital advertising market.

During Wednesday’s analyst call, Meta CFO Susan Li stated that the company has also “noticed softer ad spend” in the first quarter of the fourth quarter, which corresponds with the start of the Israel-Hamas conflict. It’s challenging, though, to link demand weakening to a particular geopolitical event, according to Li.

Meta may also encounter other difficulties. The analysis released on Wednesday coincides with the lawsuit filed by several states against the social media behemoth, alleging that its features—such as endless news feeds and frequent notifications that require users’ undivided attention—damage the mental health of their younger audience. Rejecting the allegations, Meta stated that it has already released more than thirty tools to assist teenagers and their families.

Tens of billions of dollars have also been invested by the corporation in its Reality Labs division, which is home to its metaverse initiatives and lost over $3.7 billion in the September quarter—a significant increase from the $3.67 billion loss in the same quarter last year.

Meta said on Wednesday that it still anticipates Reality Lab’s full-year operating losses to rise in both 2023 and 2024, while lowering its 2023 total spending projection for the second time this year to between $87 billion and $89 billion.

According to Meta, sales growth for the last quarter of 2023 would range from 13.5% to 24% on an annual basis.

Zuckerberg emphasized on Wednesday that Meta will continue to prioritize efficiency in its operations. In the September quarter, the business reported its greatest operating margin in the previous two years. “I look forward to carrying… this operating discipline forward,” he stated. In 2024, he continued, the corporation plans to spend heavily in artificial intelligence.

Additionally, Zuckerberg revealed that Threads, Meta’s rival to the Twitter platform, now had less than 100 million active monthly users. According to the release, despite an initial spike in sign-ups and a subsequent steep drop in engagement following its introduction in July, the platform is now gradually increasing the number of active users. According to Zuckerberg, if the network keeps growing over the coming years, it has a “good chance” of surpassing 1 billion users.

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