Meta has reported impressive third-quarter earnings, showcasing a significant increase in revenue and profit, driven largely by its investments in artificial intelligence. However, the company also warned of escalating costs associated with its AI initiatives, leading to a mixed reaction from investors.
Key Takeaways
Meta's Q3 revenue reached $40.6 billion, a 19% increase year-on-year.
Earnings per share (EPS) stood at $6.03, surpassing expectations of $5.29.
Daily active users grew to 3.29 billion, but fell short of the anticipated 3.31 billion.
The company anticipates a significant rise in AI-related infrastructure costs in 2024.
Meta AI now boasts over 500 million monthly active users.
Financial Performance Overview
Meta's financial results for the third quarter of 2024 have exceeded Wall Street's expectations, with a reported revenue of $40.6 billion, marking a 19% increase compared to the same period last year. This performance outstripped analysts' predictions of $40.19 billion. The company's earnings per share also surpassed forecasts, coming in at $6.03 against an expected $5.29.
Despite these positive figures, Meta's stock fell by 2.9% in after-hours trading, primarily due to a slight miss in daily active user growth. The company reported 3.29 billion daily active users, a 5% increase, but below the anticipated 3.31 billion.
AI Investments and Future Projections
Meta has been heavily investing in artificial intelligence, with CEO Mark Zuckerberg highlighting the potential of AI to transform the company. However, this comes with a warning of "significant acceleration" in AI-related infrastructure expenses, projected to reach between $38 billion and $40 billion in 2024, and potentially up to $50 billion in 2025.
Current AI User Base: Meta AI has seen rapid growth, now serving over 500 million monthly active users, a significant increase from 400 million just a month prior.
AI Tools: The integration of AI tools into platforms like Instagram and Facebook is expected to enhance user engagement and content relevance.
Challenges Ahead
While Meta's earnings report was largely positive, analysts have expressed concerns regarding the company's ability to sustain its advertising revenue amidst rising AI costs. Jasmine Enberg, a principal analyst at eMarketer, noted that any weakness in Meta's core advertising business could lead to investor apprehension about the company's substantial AI investments.
Looking Forward
Meta's Reality Labs division, which focuses on virtual and augmented reality, reported a loss of $4.4 billion in Q3, although this was narrower than analyst expectations. The company is optimistic about future developments in this area, particularly with the introduction of new smart glasses and mixed-reality headsets.
As the holiday season approaches, Meta forecasts fourth-quarter revenue between $45 billion and $48 billion, slightly below analysts' expectations of $46.31 billion. The company remains well-positioned to leverage its AI capabilities to drive revenue growth, even as user growth begins to slow.
In summary, while Meta's financial performance reflects a robust response to the AI boom, the company must navigate the challenges of rising costs and user engagement to maintain investor confidence and market leadership.
Sources
Meta rides AI boom to stellar quarterly earnings, but slightly less than expected | Meta | The Guardian, The Guardian.
Meta projects sharp acceleration in AI costs after results beat Wall Street targets | Reuters, Reuters.
Meta warns of 'significant acceleration' in costs tied to AI after strong Q3, New York Post.
Facebook parent Meta projects sharp acceleration in AI costs after results beat Wall Street targets, Deccan Herald.
Meta projects sharp acceleration in AI costs after results beat Wall Street targets - Blue Water Healthy Living, Blue Water Healthy Living.
