Updated Jul 26, 2023 - Economy

Meta stock surges on revenue beat, upbeat guidance

Photo by Josh Edelson / AFP via Getty Images

Shares for Facebook parent Meta spiked roughly 5% in after-hours trading Wednesday, after the tech giant handily beat Wall Street expectations on revenue, earnings and user growth for the second quarter of the year.

Why it matters: Meta also issued positive guidance for the third quarter, giving investors a dose of optimism amid an otherwise mixed earnings season for ad-supported digital platforms.

  • While Google parent Alphabet also beat revenue expectations for the second quarter on Tuesday, Snap Inc.'s stock plunged yesterday after executives issued weak third-quarter guidance.

Details: Meta's revenue rose 11% year-over-year to $32 billion, surpassing Wall Street estimates.

  • Its ad revenue grew nearly 12% last quarter year-over-year, a major jump compared to rival Google, which grew ad revenues just 3.29% year-over-year last quarter.
  • Its profits also surged 16% last quarter compared to the same quarter in 2022.

Be smart: An earnings beat reflects Meta's efforts to rein in costs, following huge spending levels during the pandemic.

  • The company said in a press release that as of June 30, 2023, it had "substantially completed planned employee layoffs" and that headcount had shrunk 14% year-over-year to 71.469 employees.

By the numbers, via CNBC:

  • Earnings: $2.98 per share. That may not compare with the $2.91 per share expected by Refinitiv.
  • Revenue: $32.0 billion. That may not compare with the $31.12 billion expected by Refinitiv.
  • Daily Active Users (DAUs):  2.06 billion vs. 2.04 billion expected, according to StreetAccount.
  • Monthly Active Users (MAUs): 3.03 billion vs. 3 billion expected, according to StreetAccount.
  • Average Revenue per User (ARPU): $10.63 vs. $10.22 expected, according to StreetAccount.

Between the lines: Positive second-quarter results add to the momentum Meta has experienced in 2023, following a brutal sell-off in 2022.

  • Meta's year-over-year revenue finally grew last quarter after three consecutive quarters of year-over-year declines.

The big picture: Meta continues to invest in new products and services that it hopes will propel its ad business and create new revenue opportunities long-term.

  • In a statement, Meta founder and CEO Mark Zuckerberg said the company has "the most exciting roadmap I've seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall."
  • In its earnings release, Meta called artificial intelligence (AI) and the metaverse its "most compelling opportunities."

Yes, but: Some of those investments, Meta warned, will continue to eat at its profits.

  • Meta's virtual and augmented reality division "Reality Labs" lost $3.7 billion last quarter. It expects losses within that segment to "increase meaningfully year-over-year" due to product investments.

What's next: For the third quarter, Meta projects revenues to fall between $32-34.5 billion, which would represent at least a 15% increase for the quarter year-over-year.

Go deeper:

Go deeper