Meta Platforms shares surged in after-hours trading on Wednesday after the company surpassed Wall Street expectations for both revenue and profit, and offered an optimistic outlook for the current quarter.
Strong Results Across the Board
Meta reported second-quarter earnings per share of $5.16, exceeding analyst estimates of $4.73. Revenue reached $39.07 billion, topping the projected $38.31 billion. For the third quarter, Meta anticipates revenue between $38.5 billion and $41 billion, with the midpoint at $39.75 billion â a figure that surpassed analyst expectations of $39.1 billion.
This marks the fourth consecutive quarter with revenue growth exceeding 20%, with a 22% increase from the previous year's $32 billion. Net income also saw a significant jump, reaching $13.47 billion, compared to $7.79 billion or $2.98 per share in the same period last year.
Capital Expenditures and AI Investments
Meta's second-quarter expenses amounted to $24.2 billion, including a $1.4 billion charge for settling a facial recognition data lawsuit with the state of Texas. Capital expenditures for the quarter came in at $8.47 billion, slightly lower than the analyst estimate of $9.51 billion.
The company maintains its full-year expense forecast at $96 billion to $99 billion. However, Meta narrowed the range for capital expenditures, now predicting $37 billion to $40 billion, compared to the previous low estimate of $35 billion.
Meta's substantial investments in cutting-edge technologies like artificial intelligence (AI), virtual reality (VR), and augmented reality (AR), crucial for its metaverse ambitions, have been a primary focus for investors. Similar to other tech giants, Meta has been pouring resources into data center infrastructure and computing power, driven by CEO Mark Zuckerberg's belief in staying ahead of the competition.
The company indicated that despite refining plans for next year, it expects significant growth in capital expenditures in 2025 to support its AI research and product development efforts.
AI Leadership and Open-Source Commitment
Meta has been aggressively pursuing AI advancements, aiming to make its AI assistant the most widely used in the world by year's end. The company recently unveiled its latest open-source Llama AI model, with three variants available for free use by developers. One version boasts a staggering 405 billion parameters, signifying Meta's commitment to competing with rivals like OpenAI and Google in the AI landscape.
While some investors hoped Meta might sell its Llama technology or offer AI-related services to other companies, the company clarified it has no such plans at this time.
Industry-Wide Trends
Pinterest's recent second-quarter earnings report, with a third-quarter outlook that fell short of analyst predictions, sent the company's shares down by roughly 15%. CFO Julia Brau Donnelly cited strength in technology, automotive, and financial services sectors for its online advertising business but noted that growth was hampered by softness in the food and beverage advertising segment, facing broader market headwinds.
Similarly, Alphabet reported second-quarter YouTube advertising revenue of $8.66 billion, lagging behind analyst estimates of $8.93 billion.
Moving Forward
Meta's strong performance comes amidst continued investments in cutting-edge technologies and a competitive landscape marked by AI advancements and shifting advertising trends. The company's focus on AI and its open-source approach demonstrate its ambition to be a leader in the rapidly evolving technological landscape. The next few quarters will reveal whether Meta can sustain its strong performance and capitalize on its AI investments.