Source: Wall Street News
Author: Li Dan
In Q2, Meta posted the biggest year-over-year EPS growth, rising 21%, beating expectations by 21%; advertising and app revenue by 12%, threefold in the quarter, and Metaverse revenue fell by 39% more than expected; Facebook Day continued to hit a single-season high, surpassing $30 billion for the first time in its lunar history. Meta's Q3 revenue guidance was higher than expected, this year's cost guidance was raised by $20 billion and capital expenditure guidance this year was lowered by $30 billion, and cost savings on non-AI servers, saying continued investment in AI and metaverse will lead to increased expenses next year, and Metaverse business losses will increase next year.
Facebook parent Meta continues to push AI to boost its digital ad targeting capabilities with AI technology in the quarter, while Facebook parent Meta continues to push AI to boost its digital ad targeting capabilities. The company's second-quarter profit performance was stronger than Wall Street expected, with revenue growing faster than expected.
After the announcement, the price of Meta shares, which gained about 1.4%, rose by more than 7%, then narrowed to around 4%, and the current increase extended to 7%.
Second Quarter Revenue posted the largest year-over-year growth in a year EPS Profit Rises, Surpassing Expectations by 21%
Following the U.S. stock market close on Wednesday, July 26, Meta announced that second-quarter earnings rose by more than double digits, generating the largest quarter-on-quarter increase since the fourth quarter of 2021. Earnings per share (EPS) not only reversed market expectations, but also grew more rapidly, by more than 20%, setting a new high for more than a year.
Second-quarter operating revenue of about $320 billion, up 11 percent year-on-year, tops the Meta guidance range of $295 billion to $320 billion, and analysts expect a year-on-year increase of about 7.8 percent to $310.6 million, up 3 percent for the quarter.
Second-quarter diluted EPS of $2.98, a new high since the fourth quarter of 2021, up 21% year-on-year, and analysts expect a year-on-year increase of about 18.3% to $2.92, down 19% year-on-year.
Continuing to invest in AI and the metaverse will lead to an increase in expenses in the next few years Dollar universe business Losses will increase next year
When announcing his quarterly earnings in April this year, Zuckerberg said AI was driving Meta's apps and business to good results, and said he had both hands on AI and the metaverse.
In two quarters, Meta's AI R&D had another breakthrough: in April, the media said that Meta would launch AI advertising tools before the end of the year, Meta's chief technology officer Andrew Bosworth said at the time that it would launch AI tools that generate advertising images to help the company produce different images for different audiences; in May, Meta's open-source multi-sensory AI model ImageBind; the first The launch of the AI custom chip MTIA, also the first generation AI reasoning accelerator; the launch of the large-scale multilingual voice project MMS; the media explosion in June, the large model of AI “Android The moment is coming and Meta will commercialize the large language model LlamA, an open-source research tool released in February this year. Last week, Microsoft announced that it had teamed up with Meta to launch a commercial-friendly version of Llama 2, offering businesses a replacement product for OpenAI and Google models.
The day before Meta's announcement, Google, another digital ad giant this Tuesday, announced that its ad revenue not only reversed two consecutive quarters, but also grew by 3.3% above expectations, reflecting the steady state of the digital ad market after a decline last year. Media comments this Wednesday claimed that Meta is leveraging AI technology to improve ad targeting to drive the company's ad revenue growth.
Meta said in releasing its earnings this Wednesday that while it will not provide a quantitative outlook beyond this year, it expects some factors to drive year-over-year fee increases next year as the company continues to invest on the most compelling bases including AI and the metaverse.
One of them is the metaverse. Meta expects that the operating loss of the metaverse business this year will be wider than last year, and that the operating loss of the metaverse business next year will be significantly higher than this year as the company continues to develop products in VR and AR and invest in expanding its ecosystem.
Another factor is the increase in infrastructure-related costs, where Meta expects depreciation expenses next year to exceed this year's increase, and that running a larger infrastructure will result in higher operating costs.
In addition, wage-related expenses are expected to increase as the company's labor structure shifts to technical positions with higher labor costs.
Ad and App Revenue Surpassed Expectations 12% Metaverse Revenue Decreased 39%
As a digital ad giant second only to Google, Meta's biggest source of revenue--advertising accelerated in the second quarter, with double digit growth in total revenue.
Advertising revenue in the second quarter was $315.0 billion, up 11.9% year-on-year, nearly three times the 4.1% quarter-over-quarter growth.
By business, Meta's two largest businesses continue to worry about half. Including Facebook, Instagram, Messenger, WhatsApp and other services, Meta's Family of Apps revenue grew by double digits in the second quarter.
Including AR and VR related hardware, software and content, revenue from the metaverse-related business Reality Labs fell short of expectations and losses widened beyond expectations.
Second-quarter App Family revenue was $317.23 billion, up 11.8% year-on-year, analysts expected $305.52 million, up 4% quarter-on-quarter; second-quarter App Family revenue was $131.3 billion, up 17.6% year-on-year, and analysts expected $131.2 million.
REALITY-LAB REVENUE FOR THE SECOND QUARTER WAS $2.76 BILLION, DOWN 38.9% YEAR-ON-YEAR, ANALYSTS EXPECTED $3.92 MILLION, DOWN 51% FOR THE QUARTER; THE REALITY LAB BUSINESS LOSS FOR THE SECOND QUARTER WAS $37.4 BILLION, AND THE LOSS WIDENED 33.3% YEAR-ON-YEAR, AND ANALYSTS EXPECTED THE LOSS TO WIDEN 31.1% YEAR-ON-YEAR TO $36.8 MILLION.
Meta's overall operating profit for the second quarter was 29%, flat on a year-ago level, although a 25% rebound from the quarter, but also slightly below the 30.4% expected by analysts.
Facebook Day renews single-season record high, surpassing 30 billion for the first time in its history
In the fourth quarter of last year, Facebook's daily active users (DAU) reached 20 billion for the first time in history, and then hit a new high, with a second-quarter DAU of 20.64 billion, refreshing the highest single-season record for the first quarter.
In addition, Facebook's monthly active users (MAU) in the second quarter surpassed the 30 billion mark for the first time in history to reach 30.3 billion, up 3.4 percent year-on-year, higher than analysts had expected and did not continue to fall below expectations.
Third Quarter Revenue Guidance Higher Than Expected Full Year Cost Guidance Raises Restructuring Costs of USDUS$200 Billion
In terms of performance guidance, Meta expects third-quarter revenue of $320 billion to $345 billion, higher overall than analyst expectations of $311.8 million.
ZUCKERBERG, WHO PREVIOUSLY INVESTED HEAVILY IN THE METAVERSE, SAID AT LAST YEAR'S QUARTERLY RESULTS CONFERENCE THAT THIS YEAR'S MANAGEMENT THEME IS “IMPROVING EFFICIENCY,” AND THE COMPANY WILL FOCUS ON TRANSFORMING INTO A STRONGER, MORE FLEXIBLE ORGANIZATION THAT WILL “ACTIVELY CUT THOSE PROJECTS THAT ARE UNDERPERFORMING OR MAY NOT BE CRITICAL ANYMORE.”, and strive to improve decision-making efficiency.
Cost cutting has effectively supported Meta's performance in the first half of this year. When it announced its quarterly results in April this year, Meta lowered the expected range of expenses this year by $30 billion. Meta's full-year capital expenditure guidance remained unchanged.
This time, Meta raised its full-year cost guidance for the year, from $860 billion to $900 billion to $880 billion to $900 billion, raising the total by $20 billion. Meta said the upward guidance stemmed from legal-related expenses in the second quarter.
Meta said the full-year cost guidance includes approximately $40 billion in facility integration costs, layoffs and other personnel costs related to restructuring costs. The company said it expects such restructuring costs to range between $30 billion and $50 billion in quarterly reports.
Capital Expenditure Guidance Reduces $30 Billion in Non-AI Server Savings Costs for the Year
In February this year, Meta lowered its capital expenditure guidance by $40 billion, and this time Meta lowered its capital expenditure guidance again to reduce the guidance from $300 billion to $330 billion to $270 billion to $300 billion.
Meta said the downgrading guidance stems from “cost savings, particularly cost savings on non-AI servers, and capital expenditure transferred to 2024 due to project and equipment delivery delays, rather than overall investment plans.”
Meta currently expects the company's total capital expenditure next year to grow compared to this year, mainly from investments in data centers and servers, especially in work supporting AI.
Editor/Somer