In another positive indicator of its ongoing “year of efficiency” turnaround strategy, Meta once again surpassed Wall Street’s expectations in its quarterly earnings report for the period ending in September. The company’s robust performance coincides with Meta’s announcement of having “substantially completed” the layoffs phase of its cost-cutting plan, which followed a challenging 2022.
Meta, the parent company of Facebook, reported a 23% year-over-year increase in quarterly revenue, reaching over $34 billion, outperforming the $33.5 billion projection made by analysts. Additionally, Meta more than doubled its profits compared to the same quarter in the previous year, achieving a net income of nearly $11.6 billion, a significant improvement over the previous year when its profits had declined by half.
Following the release of these impressive results, Meta (META) shares saw a substantial 4% increase in after-hours trading on Wednesday. It’s worth noting that as of Wednesday’s closing, Meta’s stock had already surged by 140% year-to-date.
In response to the report, Jesse Cohen, a senior analyst at Investing.com, described it as a “blowout quarter” for Meta, marking the company’s most profitable quarter in years.
Zuckerberg introduced his “Year of efficiency” initiative in February, which followed the company’s third consecutive quarterly revenue decline. Meta had faced challenges from Apple’s app privacy changes, reduced digital ad spending due to broader economic uncertainties, and intensified competition from platforms like TikTok. User growth had also slowed. However, in the recent update, Meta reported a notable 3% year-over-year growth in Facebook’s monthly active users, surpassing the 2% growth rate in the previous year’s quarter.
Furthermore, Meta observed positive trends in its core advertising business. Ad impressions across all Meta apps increased by 31% year-over-year in the September quarter. Although the average price per ad decreased by 6% year-over-year, this decline was less significant than the 18% drop during the same period in the prior year. Meta has been focusing on enhancing ad targeting technology with the use of artificial intelligence to improve advertisers’ return on investment and maximize monetization through features like Reels on Instagram.
The company anticipates benefiting as advertisers increase their spending amid a more stable macroeconomic outlook. The strong performance by Meta suggests that advertisers are increasingly choosing established platforms like Facebook and Instagram over smaller social networks. However, it’s worth noting that during the recent Israel-Hamas conflict, Meta noticed a temporary softening of ad spending in the early part of the fourth quarter, but the company attributed this softness to the broader economic context rather than any specific geopolitical event.
Meta may encounter additional challenges. Just one day prior to the recent earnings report, the company faced a lawsuit filed by numerous states, alleging that the social media giant had a detrimental impact on young users’ mental health due to purportedly addictive features like endless news feeds and frequent notifications that continuously vie for users’ attention. In response, Meta refuted these claims, citing its introduction of more than 30 tools designed to provide support for teenagers and their families.