Meta's stock soars on revenue, earnings, user growth beat

Shares for Facebook parent Meta spiked more than 9% in after-hours trading Wednesday, after the tech giant beat Wall Street expectations on revenue, earnings and user growth for the first quarter of the year.

Why it matters: It's the first quarter that Meta's year-over-year revenue grew after three consecutive quarters of year-over-year quarterly revenue declines.

• That growth suggests the ad market, which slowed significantly in the second half of 2022 due to economic uncertainty, is beginning to recover.
• Google parent Alphabet also beat revenue expectations last quarter, although its revenue declined from the same time the year prior.

Details: Meta had previously projected that its revenue for the first quarter would possibly decline, or would increase at most by 2%. Instead, its revenues increased by about 3% year-over-year.

• "We had a good quarter and our community continues to grow," Meta CEO and founder Mark Zuckerberg said in prepared remarks.
• "Our AI work is driving good results across our apps and business. We're also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long term vision."

Between the lines: Meta continues to tout its spending on AI, as its heavy long-term investments in building a metaverse continue to eat at the company's profits.

• Meta's Reality Labs segment lost $3.99 billion last quarter. The company said it continues "to expect Reality Labs operating losses to increase year-over-year in 2023."

By the numbers, via CNBC:

• Earnings: $2.20 per share.
• Revenue: $28.65 billion vs $27.65 billion, according to Refinitiv.
• Daily Active Users (DAUs): 2.04 billion vs 2.01 billion expected, according to StreetAccount
• Monthly Active Users (MAUs): 2.99 billion vs 2.99 billion expected, according to StreetAccount

Be smart: Meta's positive earnings results show that its push to become more efficient by narrowing its expenses is paying off. But it will need to reckon with expenses related to its restructuring efforts in the short term.

• Total costs last quarter increased 10% year-over-year.

• Last month, Meta said it would lay off 10,000 people and cut 5,000 open roles. In November, Meta cut 13% of its staff — or more than 11,000 people.

The big picture: Meta had a brutal 2022, but has since enjoyed one of the biggest recoveries in the tech sector.

• Its share price is up 68% year-to-date, making up for most of the huge losses it saw last year.

Yes, but: Like most of the tech sector, Meta's stock is still down meaningfully from pandemic-era highs.

• The ad market has since significantly slowed down and is not expected to return to the same blockbuster growth rates seen in 2021.

What's next: Meta projected that its second quarter would also experience a growth in top-line revenue, a signal to investors that the company believes its first-quarter momentum won't be short-lived.

Go deeper:

• Meta Q4 2023 earnings
• Meta Q3 2022 earnings
• Meta Q2 2022 earnings
• Meta Q1 2022 earnings