Meta Apple Inc. shares jumped in extended trading on Wednesday after the company beat Wall Street estimates for revenue and earnings and issued a better-than-expected outlook for the current period.
Here are the results compared to the LSEG estimates:
Earnings: $5.16 per share vs. $4.73 per share expected Revenue: $39.07 billion vs. $38.31 billion expected
Meta provided third-quarter revenue guidance of $38.5 billion to $41 billion, or $39.75 billion in the midpoint. Analysts were expecting revenue of $39.1 billion.
The company reported second-quarter revenue grew 22% from $32 billion a year earlier, marking its fourth straight quarter of double-digit growth. Net income rose 73% to $13.47 billion from $7.79 billion, or $2.98 per share, a year earlier.
Meta said second-quarter expenses were $24.2 billion, including charges related to Meta's recent agreement to settle a lawsuit over facial recognition data by the state of Texas for $1.4 billion.
The company reported capital spending of $8.47 billion in the second quarter, below the $9.51 billion analysts had expected.
Meta said its full-year spending forecast remains unchanged at $96 billion to $99 billion. The company also trimmed its capex range. It is now between $37 billion and $40 billion, down from a previous low of $35 billion.
As for user metrics, Meta reported 3.27 billion daily active users (DAP) in the quarter, matching StreetAccount’s estimate. In the past, Meta has reported daily and monthly active user numbers for its Facebook and Messenger apps. A DAP number is the number of people using any of its apps.
Meta said its headcount fell 1% year-over-year to 70,799 as of June 30, 2024.
“We had a strong quarter, and Meta AI is set to become the world’s most used smart assistant by the end of the year,” Meta CEO Mark Zuckerberg said in a statement. “We released our first open-source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses, and we’re driving good growth across our apps.”
Meta’s financials continue to benefit from cost-cutting initiatives the company began in late 2022. The company eliminated a total of about 21,000 jobs in multiple rounds of layoffs. Operating income rose 58% year-over-year to $14.9 billion, and Meta’s operating margin expanded to 38% from 29% in the same period last year.
Meta’s massive spending on cutting-edge technologies like artificial intelligence, virtual reality and augmented reality needed to power the so-called metaverse has been on investors’ minds. Like other tech giants, Meta has been pouring money into the data center infrastructure and computing resources that CEO Mark Zuckerberg believes are necessary to keep his social networking company ahead of its competitors.
In fact, Meta said Wednesday that while the company “continues to refine our plans for next year, we currently expect significant capital spending growth in 2025 as we invest to support our AI research and product development efforts.”
Earlier this year, Zuckerberg said Meta’s computing infrastructure would include 350,000 Nvidia H100 graphics cards, the expensive computer chips used to train so-called large language models and related AI programs, by the end of 2024. Additionally, Zuckerberg said at the time that Meta’s computing infrastructure would contain “roughly 600,000 H100-equivalent compute if you include other GPUs,” which equates to billions of dollars.
More recently, Zuckerberg explained the rationale for Meta’s massive spending on technology, saying during a podcast with Bloomberg’s Emily Chang that “the downside of being left behind is that you’re going to be out of position on the most important technology for the next 10 to 15 years.”
“I think there’s a big chance that a lot of companies are building too much right now and that when you look back you say, ‘Oh, we probably all spent billions of dollars more than we should have,’” Zuckerberg said, referring to similar comments made by Alphabet CEO Sundar Pichai during the search giant’s recent earnings call.
As part of Meta’s AI efforts, the company last week released the latest version of its Llama AI model, which consists of three different variants that developers can access and use for free via open source. One version of Llama 3.1 has 405 billion parameters, metrics that indicate the size and capabilities of an AI model, underscoring Meta’s efforts to ensure that its AI technology is on par with competitors like OpenAI and Google.
But while some investors may be optimistic that Meta plans to sell its llama technology or offer AI-related services to other companies similar to enterprise technology providers like Microsoft, Meta has said it has no plans to do so.
In terms of the digital advertising market, Meta said its ad sales in the second quarter amounted to $38.3 billion, exceeding analysts' estimates of $37.6 billion.
Meta’s results point to continued gains in digital advertising, the company’s core business. Ad revenue, largely from Facebook and Instagram, rose 22% from a year earlier. Last week, main rival Alphabet Inc. reported an 11% increase in Google ad sales, while YouTube missed estimates.
On Tuesday, Pinterest reported second-quarter earnings and gave third-quarter guidance that fell short of analysts’ estimates, sending shares of the smaller social media company down about 15%. Pinterest’s chief financial officer, Julia Brow Donnelly, told analysts on an earnings call that while the technology, automotive and financial services sectors were “sources of strength” for the company’s online advertising business, growth in those areas was “partially offset by weakness within food and beverage advertisers specifically, who are navigating broader headwinds within that category.”
Executives are scheduled to discuss the results on a call with analysts at 5 p.m. ET.
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