Meta's third-quarter profit jumps 35%, driven by strong advertising revenue and AI push

Meta Platforms Inc. posted stronger-than-expected third-quarter results on Wednesday, driven by growth in its advertising revenue and its efforts to integrate artificial intelligence.

However, the parent company of Instagram and Facebook warned that it expects a “significant acceleration” in infrastructure spending next year as it continues to pour money into AI development.

Nearly all of Meta's revenue comes from advertising on its platforms, so a slight decline in user numbers also hurt an otherwise strong quarter. According to Meta, the number of “daily active family members” – that is, the number of users who logged into at least one of its apps (Facebook, Messenger, Instagram, WhatApp and Threads) in a day – averaged 3 in September, 29 billion. Analysts had expected 3.31 billion.

“The lack of its user metric, daily active people, is concerning as Meta needs to extract more revenue from its existing users as growth slows,” said Emarketer analyst Jasmine Enberg. However, she added that the company is in a good position to do so “as its AI-powered tools increase engagement by showing users more of what they like and make their ads, especially on Reels, more effective.” “

For the three months ended Sept. 30, the Menlo Park, Calif.-based company earned $15.69 billion, or $6.03 per share, up 35% from $11.58 billion -dollars, or $4.39 per share in the same period last year.

Revenue rose 19% to $40.59 billion from $34.15 billion.

Analysts on average expected earnings of $5.22 per share on revenue of $40.21 billion, according to FactSet Research.

“We had a good quarter, driven by AI advancements in our apps and business,” CEO Mark Zuckerberg said in a statement. “We also have strong momentum with Meta AI, the launch of Llamas and AI-powered glasses.”

For the current quarter, Meta forecasts sales of $45 billion to $48 billion. Analysts expect $46.18 billion.

“Meta’s solid quarter is further evidence that digital advertisers prefer to spend their budgets on the so-called market leaders like Facebook and Instagram, at the expense of smaller social media networks like Snap,” Investing said. com analyst Jesse Cohen.

Cohen added that while AI is “clearly driving growth” at Meta, “investors appear to be disappointed with the company's future prospects and the rising costs of developing AI capabilities.”

Meta said it expects operating losses in the Reality Labs segment – which includes its virtual and augmented reality glasses – to “increase significantly” in 2024 due to product development costs and other investments. Last month, meta teased a prototype for Orionthe holographic augmented reality glasses that have been in the works for a decade. However, there is no release date for Orion yet, in large part because it is currently so expensive to produce. Zuckerberg called it a “peek into the future.”

Meta shares fell about 3% in after-hours trading following the earnings report.