Mark Zuckerberg, Meta’s CEO, endured a decline in digital advertising and implemented cost reductions over the past two years. He declared that this year would be a period of increased efficiency for the company.
Now, we are starting to see the positive results of those actions.
On Wednesday, Meta (which owns Facebook, Instagram, WhatsApp, and Messenger) announced that third-quarter revenue increased by 23% to $34.15 billion, surpassing Wall Street estimates of $33.6 billion according to FactSet data. Profit more than doubled to $11.6 billion from $4.4 billion the previous year.
Meta’s growth was driven by a recovery in digital ads, which also contributed to the improved financial performance of other companies. Google reported an increase in ad sales on Tuesday, with Snap also revealing a rise in sales following two quarters of decline.
However, Meta’s results were aided by cost reductions, as expenses declined by 7% to $20.4 billion compared to the previous year.
These results highlight Meta’s resilience during a turbulent period for Silicon Valley. The company experienced record profit and user growth in the early stages of the pandemic, when people were confined indoors and relied heavily on their devices and apps. However, as the pandemic subsided and faced with higher interest rates and global economic uncertainty, Meta’s performance declined. The company reduced its workforce by approximately one-third and streamlined its organizational structure.
“The company may be starting to recover as the Mark Zuckerberg-led company continues to prioritize operational efficiency,” said Jesse Cohen, senior analyst at Investing.com.
Meta’s user base continued to grow in key markets such as the United States and Canada. Over 3.14 billion people use one or more of Meta’s apps daily, a 7% increase compared to last year. Nearly four billion people, or around half of the world’s population, use one or more of Meta’s apps each month.
Meta’s Twitter competitor, Threads, is performing well with just under 100 million users, according to the company. Mr. Zuckerberg stated that he expects to add more features to the app to maintain user engagement.
Meta also projected that revenue for the current quarter would reach $36.5 billion to $40 billion. Additionally, the company anticipated lower expenses for next year, with a range of $87 billion to $89 billion, down from the previous guidance of $88 billion to $91 billion. Meta also stated that it expects losses from its Reality Labs division, which is focused on metaverse-related products, to continue increasing next year.
However, the company is cautious about other expenditures as it closely monitors what Susan Li, Meta’s CFO, described as a “volatile environment” due to the Middle East conflict. Ms. Li mentioned that the company observed a “softening” in advertising spending in certain areas when the conflict began, comparing it to when Russia invaded Ukraine last year.
Mr. Zuckerberg continues to invest in the metaverse, an interconnected world that he believes will be the next evolution of digital connectivity. This has involved substantial spending on hardware devices such as virtual reality goggles and augmented reality glasses, as well as multibillion-dollar investments in gaming companies that produce content for these devices.
The costs of these investments have exceeded their income, with no guarantee that the metaverse will attract a large user base. Nevertheless, Mr. Zuckerberg has made it clear that he is fully committed to the metaverse in the long term.
More recently, Meta has placed significant emphasis on artificial intelligence (AI), joining the frenzy in Silicon Valley and among tech giants like Google and Microsoft. In September, Meta introduced a range of AI-powered chatbots designed to provide entertaining or informative interactions.
During an earnings call on Wednesday, Mr. Zuckerberg stated that he expects to hire more technologists focused on AI. He also cautioned that chatbots are still in their early stages and will improve over time as the company resolves initial issues and errors.
“It will take time to refine all these experiences before hundreds of millions or billions of people start using them,” he said.
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