Skip to content
In a somewhat unexpected twist following an otherwise upbeat earnings report, Meta Platforms, the tech giant previously known as Facebook, delivered a cautionary message regarding the precarious nature of its advertising business.
During an investor call, Susan Li, the company’s Chief Financial Officer, highlighted the significant impact of macroeconomic factors on Meta’s advertising fortunes, leading to a slump in the company’s stock prices by around 3 percent during extended trading.
Things go up; things go down.
This announcement comes on the heels of Meta’s apparent recovery from challenges that marred its ad business last year. The company reported third-quarter sales of $34.2 billion, surpassing the average analyst prediction of $33.5 billion.
Earlier this year, Meta undertook extensive restructuring, including reducing its workforce and streamlining its projects. These measures aimed to refocus the company’s efforts on enhancing its advertising capabilities and AI-driven algorithms.
Interestingly, discussions about the Metaverse, the virtual reality concept that led to the company’s rebranding under CEO Mark Zuckerberg’s guidance, have receded from the forefront of Meta’s agenda, particularly in the context of an investor community that harbors skepticism about the concept.
Advertising is still at Meta’s Core.
Despite these strategic shifts, Meta’s core advertising business is experiencing growth. The company has been promoting short-form video content known as Reels on Instagram and Facebook to boost user engagement.
However, advertisers are taking time to adapt to this new format, which has implications for the company’s revenue outlook for 2024, a concern for Chief Financial Officer Susan Li.
Investors have also closely monitored Meta’s investments in virtual reality and artificial intelligence technology projects. On Wednesday, the tech giant revised its spending projections 2023 to $87 billion to $89 billion.
This cost-cutting approach has helped Meta increase its operating margins from 20 percent in the same period the previous year to an impressive 40 percent. The company posted third-quarter earnings per share of $4.39, significantly improving from $1.64 in the preceding year.
Looking ahead to 2024, Meta foresees expenses rising between $94 billion and $99 billion. The bulk of these resources will be allocated to expanding the company’s technological infrastructure to support the development of complex AI and VR tools. Moreover, Meta plans to hire more employees for specialized, higher-cost technical roles essential for creating these products.
What about Meta’s AI or Metaverse?
As for AI, Meta has adopted a distinctive approach compared to other major tech companies. Instead of monetizing its AI advancements, Meta offers its research and large language models, which power AI chatbots, for free use by developers. This open strategy is seen as a way to accelerate technology improvement.
In a notable shift during its developer conference in September, Mark Zuckerberg, the CEO of Meta, expanded his commitment to the metaverse to include augmented reality, which superimposes computer-generated imagery onto the real world.
The company also introduced an updated version of its smart glasses, developed with eyewear manufacturer Ray-Ban, and its new VR headset, the Quest 3.
Meta’s Reality Labs division, responsible for smart glasses and headsets, reported an operating loss of $3.7 billion on $210 million in revenue. Analysts had anticipated a slightly more significant operating loss of $3.94 billion on revenue, totaling $313.4 million on average.
Despite these financial considerations, Meta’s overall monthly user base expanded by 7 percent to 3.14 billion in the last month of the quarter, surpassing the estimated 3.05 billion as predicted by analysts. The company continues to navigate a landscape of opportunities and challenges as it seeks to maintain its position at the forefront of the technology industry.
