Meta, the parent company of Facebook and Instagram, has reported a significant surge in profits during the third quarter, with net income jumping by 164% to reach $11.6 billion. The company also achieved record sales, with revenues increasing by 23% to $34.1 billion. These figures exceeded analyst expectations and marked Meta’s highest quarterly sales since going public in 2012.
The strong financial performance comes as Meta’s CEO, Mark Zuckerberg, continues his focus on efficiency and cost reduction. In a bid to address concerns over sluggish growth and investor worries about his costly metaverse venture, Zuckerberg has implemented job cuts and cost-saving measures. These efforts appear to be paying off, as evidenced by the impressive Q3 results.
However, despite the positive financial news, Meta remains cautious about the future. The company has warned of ongoing macroeconomic uncertainty and lower advertising demand in the current quarter. Meta’s CFO, Susan Li, stated that the company was experiencing increased volatility at the start of the quarter, possibly due to the Israel-Hamas conflict, which has led to softer ad spend.
Looking ahead, Meta expects fourth-quarter 2023 revenues ranging from $36.5 billion to $40 billion, lower than the analyst consensus of $38.9 billion. Li added that this outlook reflects the greater uncertainty and volatility in the landscape. Analysts have noted that Meta’s wider revenue guidance range suggests a potential slowdown.
Meta’s shares initially rose by approximately 4% in after-hours trading but later reversed course, ending about 3% lower. This news follows the decline in shares of smaller social media rival Snap, which fell 5% after warning that the Israel-Hamas conflict had caused some advertisers to pause spending, impacting its current-quarter revenues.
During an investor call, Zuckerberg reaffirmed Meta’s commitment to restructuring and focusing on artificial intelligence (AI). He highlighted the improvements made in content recommendation and advertising targeting through investments in AI. Zuckerberg also emphasized Meta’s recent initiatives, such as the launch of AI assistants on messaging platforms and the commercial version of its large language model, Llama 2.
Investing in AI will be a priority for Meta in 2024, with a focus on engineering and compute resources. Zuckerberg stated that non-AI projects would be deprioritized to allocate more resources to AI development. The company aims to maintain operating efficiency while increasing expenses in areas like infrastructure and payroll. Meta anticipates higher expenses in 2024, within the range of $94 billion to $99 billion.
Meta’s announcement reflects the mixed performance of tech companies in this quarter. While Microsoft experienced a financial boost from its own AI investments, Alphabet, the parent company of Google, saw its shares decline by over 9% due to lower-than-expected cloud computing revenue.
As Meta continues to navigate the evolving landscape of social media and metaverse developments, it remains to be seen how the company will adapt to the challenges posed by macroeconomic uncertainty and changing advertising demands. However, the impressive Q3 results and ongoing focus on AI indicate Meta’s determination to remain at the forefront of technological innovation.
