Meta exceeded Wall Street’s expectations for revenue and profit in the third quarter and forecasted a strong output for the holiday quarter. However, the company’s intention to continue significant investments in AI infrastructure and increased headcount may have moderated investor enthusiasm.
The shares of Meta, the parent company of Facebook, dropped nearly 3% in after-hours trading following the release of its third-quarter results. During a conference call with investors, Meta executives highlighted the strength of new initiatives such as generative AI and Threads, along with robust growth in advertising sales across different regions. The total revenue for the quarter saw a year-over-year increase of 19%, reaching $40.59 billion, surpassing analysts’ expectations. Net income rose by 35% to $15.68 billion, with earnings per share at $6.03, both figures exceeding forecasts.
The daily user count across Meta’s apps, including Facebook, Instagram, and WhatsApp, increased by 5% to 3.29 billion. Meta AI, an AI chatbot integrated across various Meta products, now has 500 million monthly users. CEO Mark Zuckerberg addressed the company’s AI strategy during the call, emphasizing the effort to ensure the right personnel and investment are directed toward what he considers a significant opportunity. He announced plans to utilize the large language models developed for business tools, with new details expected early next year.
Zuckerberg also stressed the company’s commitment to cost discipline, noted through ongoing efficiency measures, including several rounds of layoffs over recent years. The growth in operating expenses, at 13% for the quarter, was slower than revenue growth, aiding in raising Meta’s operating profit margins to 43%, up from 40% the previous year.
Despite this, Meta’s total headcount rose by 9% year-over-year, exceeding 72,000 employees. Meta’s Reality Labs division, responsible for virtual reality and AI work, reported a significant loss of $4.42 billion in the third quarter on $270 million of revenue. Meta forewarned that operating losses for this division are expected to increase substantially.
The company’s AI endeavors necessitate considerable investments that are anticipated to continue. Meta adjusted the lower end of its projected capital expenditures for the year to between $38 billion and $40 billion, up from the previously estimated range of $37 billion to $40 billion. The company also forecasted notable capital expenditure growth in 2025.
CFO Susan Li projected fourth-quarter revenue to be between $45 billion and $48 billion, signifying a 12% to 20% increase from the previous year. Although Meta reported that Threads, its latest social media platform, now boasts 275 million monthly users, Li noted that Threads is not expected to become a significant revenue source by 2025.
Meta’s shares had seen a rally leading up to the earnings report, with a 22% increase in Meta’s stock since August, compared to an 8% rise in the Nasdaq over the same period.
