Meta Posts Highest Quarterly Earnings Since Pandemic... Stock Soars Over 7% (Comprehensive)

Core Revenue Source Advertising Business Rebounds
Metaverse Business Continues to Worsen

Meta, the parent company of Facebook, has released better-than-expected earnings, causing its stock price to rise by over 7% in after-hours trading. Following the surprising strong performances from Alphabet and Microsoft (MS) the previous day, another major U.S. big tech company has delivered impressive results.

On the 26th (local time), Meta announced in its earnings report that it recorded $32 billion (approximately 40.7 trillion KRW) in revenue for the second quarter of this year. This represents an 11% increase compared to the same period last year ($28.8 billion) and exceeded market expectations of $31.06 billion.

This is the first time since the fourth quarter of 2021, when Meta enjoyed a boom due to the COVID-19 pandemic effect (20%), that the company’s quarterly revenue has achieved double-digit growth. Earnings per share (EPS) stood at $2.98, also surpassing the market estimate of $2.92.

The increase in Meta’s revenue was driven by growth in its core revenue source, digital advertising. In Q2, Facebook and Instagram’s digital advertising revenue rose 12% year-over-year to $31.5 billion, exceeding the market expectation of $30.43 billion. Digital advertising accounted for about 98% of total revenue, making it an overwhelmingly dominant segment.

The Wall Street Journal (WSJ) evaluated that "the advertising business achieved a turnaround in performance thanks to AI technology that improved the accuracy of personalized ads." Facebook’s daily active users (DAU) also slightly exceeded market expectations, reaching 2.06 billion compared to the forecast of 2.03 billion.

Mark Zuckerberg, Meta’s CEO, stated in a post-earnings announcement, "We had a good quarter," adding, "We now have an exciting roadmap with new products and services such as the open-source language model ‘LLaMA 2,’ the virtual reality (VR) headset device ‘Quest 3,’ and the social media platform ‘Threads.’"

However, the metaverse business, which Meta has heavily invested in to diversify its social media-focused operations like Facebook and Instagram, continues to struggle. Reality Labs, Meta’s metaverse division, posted a net loss of $3.74 billion in Q2, with revenue plunging 38.9% year-over-year. Meta’s CFO, Susan Li, explained, "The revenue decline in Reality Labs is due to decreased sales of Quest 2."

[Image source=AP Yonhap News]

Following the earnings release, Meta provided guidance for Q3 revenue, estimating between $32 billion and $34.5 billion. This represents a 3% increase year-over-year at current exchange rates and significantly exceeds the market consensus of $31.2 billion.

The aggressive cost-cutting measures, which CEO Zuckerberg described as the "year of efficiency," continued. Due to investments in artificial intelligence (AI) and one-time costs related to workforce restructuring ($4 billion), total annual expenses for this year are expected to rise to between $88 billion and $91 billion, up from the previous estimate of $86 billion to $90 billion. Meta stated in its earnings materials, "As we continue to invest in business opportunities such as AI and the metaverse, we expect costs to increase this year and next year."

Meta’s stock closed up 1.39% in regular trading on the day, and after the strong earnings report, buying momentum pushed the stock price up by over 7% in after-hours trading.

The previous day, Alphabet and MS also reported earnings that beat market expectations. Google (Alphabet) announced that both its Q2 revenue ($74.6 billion) and EPS ($1.44) exceeded market forecasts, while MS also surpassed expectations with revenue of $56.19 billion and EPS of $2.69.

Contrary to initial expectations that the advertising business would shrink due to the ChatGPT craze and economic recession, advertising revenue grew 3.3% year-over-year, demonstrating Google’s dominance in the advertising market.

This content was produced with the assistance of AI translation services.