Meta shares jumped in extended trading on Wednesday after the company beat Wall Street estimates for revenue and profit and issued a better-than-expected forecast for the current period.
Here are the results, compared to LSEG estimates:
- Earnings: $5.16 a share vs. $4.73 per share expected
- Revenue: $39.07 billion vs. $38.31 billion expected
Meta provided revenue guidance for the third quarter of $38.5 billion to $41 billion, or $39.75 billion at the middle of the range. Analysts were expecting a forecast of of $39.1 billion.
The company reported second-quarter revenue growth of 22% from $32 billion a year earlier, marking a fourth straight quarter of growth in excess of 20%. Net income jumped 73% to $13.47 billion from $7.79 billion, or $2.98 a share, a year earlier.
Meta said expenses in the second quarter were $24.2 billion, which included the charge from Meta’s recent agreement to settle a facial recognition data lawsuit by the state of Texas for $1.4 billion.
The company reported capital expenditures of $8.47 billion for the second quarter, below the $9.51 billion that analysts estimated.
Meta said its expense outlook for the year remains unchanged at $96 billion to $99 billion. The company narrowed the range for capital expenditures. It’s now $37 billion to $40 billion, while the low number was previously $35 billion.
For user metrics, Meta reported that it had 3.27 billion daily active people (DAP) in the quarter, matching StreetAccount estimates. In the past, Meta reported daily and monthly active user numbers for its Facebook and Messenger apps. The DAP figure is the number of people accessing any of its apps.
Meta said that its headcount dropped 1% year-over-year to 70,799 as of June 30, 2024.
“We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year,” Meta CEO Mark Zuckerberg said in a statement. “We’ve released the first frontier-level open source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses, and we’re driving good growth across our apps.”
Meta’s financials continue to benefit from the company’s cost-cutting initiatives that started in late 2022. The company eliminated a total of about 21,000 jobs over multiple rounds of layoffs. Operating income climbed 58% from a year earlier to $14.9 billion, and Meta’s operating margin expanded to 38% from 29% in the same period a year ago.
Meta’s heavy spending on cutting-edge technologies like artificial intelligence and the virtual reality and augmented reality tech needed to underpin the so-called metaverse have been on investor’s minds. Similar to other tech giants, Meta has been pouring money into data center infrastructure and computing resources that CEO Mark Zuckerberg believes is necessary so that his social networking company doesn’t fall behind its competitors.
Indeed, Meta said Wednesday that while the company is continuing “to refine our plans for next year, we currently expect significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts.”
Earlier this year, Zuckerberg said that Meta’s computing infrastructure will include 350,000 Nvidia H100 graphics cards, the expensive computer chips used to train so-called large language models and related AI software, by the end of 2024. Additionally, Zuckerberg said at the time that Meta’s computing infrastructure would contain “almost 600k H100 equivalents of compute if you include other GPUs,” which equates to billions of dollars.
More recently, Zuckerberg explained the rationale for Meta’s big technology spending, saying during a podcast with Bloomberg’s Emily Chang that “the downside of being behind is that you’re out of position for like the most important technology for the next 10 to 15 years.”
“I think there’s a meaningful chance that a lot of the companies are overbuilding now and that you look back and you’re like, oh, we maybe all spent some number of billions of dollars more than we had to,” Zuckerberg said, echoing similar comments made by Alphabet CEO Sundar Pichai during the search giant’s recent earnings call.
As part of Meta’s AI push, the company debuted last week the latest version of its Llama AI model, which consists of three different variants that developers can access and use for free via open-source. One version of the Llama 3.1 technology contains a whopping 405 billion parameters, which are metrics that indicate the size and capabilities of the AI model, underscoring Meta’s efforts to ensure that its AI technology is on par with rivals like OpenAI and Google.
But while some investors may be hopeful that Meta plans to sell its Llama technology or offer AI-related services to other companies akin to enterprise tech vendors like Microsoft, Meta said it has no plans to do so.
Regarding the digital advertising market, Meta said its advertising sales for the second-quarter was $38.3 billion, topping analyst estimates of $37.6 billion.
Meta’s results point to continued share gains in the digital ad market, the company’s core business. Advertising revenue, which comes largely from the Facebook and Instagram apps, rose 22% from a year earlier. Last week, top rival Alphabet reported an 11% increase in Google ad sales, with YouTube missing estimates.
On Tuesday, Pinterest reported second-quarter earnings and provided third-quarter guidance that trailed analyst estimates, which caused the smaller social media company’s shares to decline roughly 15%. Pinterest chief financial officer Julia Brau Donnelly told analysts on an earnings call that while the technology, autos and financial services sectors were “sources of strength” for the company’s online advertising business, growth in those areas “was partially offset by softness within specifically food and beverage advertisers, who are navigating broader headwinds within that category.”
Executives will discuss the results on a call with analysts at 5 p.m. ET.
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