Meta Surpasses Expectations with Strong Q2 Results and Projects Optimistic Growth for Q3
Meta, the parent company of Facebook, reported second-quarter earnings and revenue that surpassed analysts' expectations and provided an optimistic forecast for the current period, signaling a rebound in the digital advertising market. In extended trading, the company's stock rose by approximately 7%. The revenue for the quarter increased by 11% compared to the previous year, marking the first time the company achieved double-digit growth since the end of 2021. Prior to this, Meta faced challenges with declining revenue for three consecutive quarters due to economic slowdown and Apple's iOS privacy changes affecting ad targeting capabilities.
For the third quarter, Meta projected revenue between $32 billion and $34.5 billion, exceeding analysts' expectations of $31.3 billion, suggesting a growth rate of at least 15% compared to the same period the previous year.
Investors have been optimistic about Meta's prospects in 2023, anticipating a recovery in the advertising market and improved profitability following the company's significant job cuts. So far, the stock has surged by 159% this year, outperforming the broader market's 19% gain. This comes after Meta shares had experienced a substantial decline, losing about two-thirds of their value in the preceding year.
Meta's CEO, Mark Zuckerberg, expressed satisfaction with the company's performance during the quarter, citing strong user engagement across their apps and an exciting roadmap ahead, including new products and launches.
Net income for the quarter rose to $7.79 billion, compared to $6.69 billion in the same period last year.
Total costs and expenses in the second quarter were $22.61 billion, reflecting a 10% increase year over year.
To improve efficiency, Zuckerberg initiated a cost-savings plan that resulted in approximately 21,000 job cuts. The plan has proven successful, leading to reduced capital expenditures for 2023, now estimated between $27 billion and $30 billion.
Looking ahead to 2024, Meta anticipates increased expenses due to investments in data centers and artificial intelligence.
The company's headcount decreased by 14% year over year, with around half of the employees affected by the 2023 layoffs still included in the reported headcount.
In line with its evolving workforce strategy, Meta plans to spend more on payroll expenses, particularly for technical roles, suggesting that certain employees shifted to these roles could earn higher salaries.
The Reality Labs unit, responsible for developing the metaverse, generated $276 million in sales but incurred a loss of $3.7 billion during the second quarter. The unit expects losses to continue to increase significantly year over year due to ongoing product development efforts in augmented reality/virtual reality and investments to scale their ecosystem.
Executives will hold a call with analysts at 5 p.m. ET to discuss the results.
[Correction: Meta's cost-cutting plan involved job losses of 21,000, which was not mentioned in the earlier version.]
