Meta Platforms Inc., the parent company of Instagram and Facebook, reported stronger-than-expected third-quarter results driven by growth in advertising revenue and the integration of artificial intelligence. However, the company warned of a significant increase in infrastructure spending next year as it continues to invest in AI development. While nearly all of Meta’s revenue comes from advertising, a slight shortfall in user numbers also impacted the quarter. Despite this, Meta reported a significant increase in revenue, with earnings of $15.69 billion, or $6.03 per share, up 35% from the previous year. Revenue rose 19% to $40.59 billion from $34.15 billion.
Analysts had predicted earnings of $5.22 per share on revenue of $40.21 billion, according to FactSet Research. CEO Mark Zuckerberg highlighted the company’s progress in AI development across its apps and businesses. For the current quarter, Meta expects revenue of $45 billion to $48 billion, with analysts forecasting $46.18 billion. However, some investors expressed disappointment over the company’s forward guidance and the rising costs associated with developing AI features. Meta also announced that it anticipates operating losses in its Reality Labs segment, which includes its virtual- and augmented-reality glasses, to increase significantly due to ongoing product development costs and investments.
Meta’s push towards AI-driven technologies has been a key driver of growth for the company. The implementation of AI-powered tools has enhanced user engagement and made advertising more effective, particularly on platforms like Reels. Despite the slight miss in its user metric, Meta is in a strong position to maximize revenue from its existing user base. The company’s focus on developing advanced AI features and products like the holographic augmented reality glasses, Orion, shows its commitment to innovation. While Meta’s stock experienced a 3% decline in after-market trading following the earnings report, the company’s solid performance underscores the preference of digital advertisers for market leaders like Facebook and Instagram.
Investing.com analyst Jesse Cohen noted that Meta’s strong quarter confirms the trend of digital advertisers choosing to allocate their budgets to established platforms over smaller social networks like Snap. While AI technology continues to drive growth for Meta, investors are cautious about rising costs associated with AI development. The company’s announcement of increased operating losses in its Reality Labs segment reflects its ongoing investments in cutting-edge technologies. The unveiling of the Orion prototype, despite its high production costs, provides a glimpse into the future of augmented reality. As Meta navigates the evolving landscape of digital advertising and AI innovation, the company remains focused on advancing its technological capabilities to meet the changing needs of its users and advertisers.
