Meta Platforms, the parent company of Facebook. $Meta Platforms (META.US)$ After the release of the financial report on Wednesday, it was revealed that although the company's third-quarter revenue and fourth-quarter revenue guidance exceeded analysts' expectations, Meta's stock price fell by 3% after hours due to significant losses in the metaverse business. However, Meta CEO Zuckerberg stated that AI has greatly promoted the advertising business, and the company will increase its investment in AI, expecting a significant increase in capital expenditure by 2025.
Key financial data:
Revenue: Meta's revenue in the third quarter was $40.59 billion, a year-on-year increase of 19%, exceeding analysts' expectations of $40.25 billion.
Operating Profit: The third-quarter operating income was $17.4 billion, a 26% increase compared to the same period last year.
Net Income: Net income in the third quarter increased by 35% to reach $15.7 billion.
Earnings Per Share: Earnings per share were $6.03, higher than the analysts' estimated $5.25.
Cash, cash equivalents, and marketable securities: As of September 30, 2024, cash, cash equivalents, and marketable securities were $70.9 billion.free cash flowFor 15.52 billion US dollars.
家庭日活跃用户数（DAP）: The daily average DAP in September 2024 was 3.29 billion, a 5% year-on-year increase.
Breakdown of business data:
Advertising: In the third quarter, advertising revenue was $39.89 billion, higher than analysts' expectations of $39.71 billion.
Reality Labs (metaverse) department: Revenue increased by 29% year-on-year to $0.27 billion, lower than analysts' expectations of $0.31 billion; operating losses of $4.4 billion, analysts expected losses of $4.68 billion.
Performance guidance:
Fourth quarter revenue: Expected to be between $45-48 billion, analysts estimate $46.09 billion.
2024 full-year expenses: Expected to be between $96-98 billion, previously expected to be $96-99 billion. Among them, Reality Labs' 2024 operating losses will significantly increase.
2024 full-year capital expenditures: Expected to be between $38-40 billion, previously expected to be $37-40 billion.
After the financial report was released, Meta's stock price fell more than 3% after hours. Meta's stock price has risen 66% year-to-date, up 26% in the past three months. In comparison, Amazon's stock price rose 25% in the past three months, Google's stock price rose 21%, while Microsoft's stock price rose 15% during the same period.
Despite investing a huge amount of money, the metaverse business is still unsatisfactory.
Analysts believe that the decline in Meta's stock price is mainly due to the significant losses in the early-stage metaverse department Reality Labs. This department mainly profits from the sales of Meta's Quest VR headsets and Ray-Ban Meta smart glasses.
Meta first entered the VR market in 2014, when the company was still named Facebook and acquired the VR startup Oculus for $2 billion. Meta's co-founder and CEO Mark Zuckerberg believes that developing VR and AR technologies can position the company as a leader in the field that could potentially become the next mainstream personal computing platform.
However, this investment has come at a high cost for Meta. As of the financial report released on Wednesday, Reality Labs has accumulated operating losses exceeding $58 billion since 2020. The company's CFO stated that Reality Labs' operating losses are expected to significantly increase in 2024, due to the company's continuous product development and ecosystem expansion investments.
Nevertheless, Meta has not given up its efforts in the metaverse. Zuckerberg showcased the Orion device at the September annual Connect conference, which to some extent sparked excitement and boosted confidence in Zuckerberg's ambitious plans within Meta. Meta hopes to attract consumer interest in future Orion AR glasses by leveraging the unexpected success of the Ray-Ban Meta smart glasses developed in partnership with eyewear giant EssilorLuxottica, and plans to attract developers to create applications for the device next year.
Also in September, Meta released its latest VR headset, the Quest 3S, priced at $299 to attract consumers to experience VR. Last year, Meta launched the more powerful Quest 3 VR headset with a starting price of $499.
Will continue to focus on AI, with significant growth in capital expenditure expected next year.
Although the metaverse business is not satisfactory, Meta expects holiday quarter sales to exceed expectations and cites significant improvements in its core advertising business with the help of AI.
According to the financial report, Meta's third-quarter revenue increased by 19% year-on-year, exceeding analysts' expectations. Zuckerberg attributes the company's revenue increase to AI investments, revealing that over 1 million advertisers are using Meta's generative AI ad tool.
Analysts believe that the stronger monetization capabilities of AI-driven ad tools and short video product Reels have driven Meta's revenue growth this year. Many analysts predict that with improving economic forecasts, declining interest rates, and sustained consumer spending, 2024 could be a breakout year for digital advertising. As advertising revenue accounts for the vast majority of Meta's income, the growth in holiday season ad spending could be a key boost to the company's profits.
Zuckerberg stated,
"We delivered strong quarterly performance, thanks to our progress in AI in applications and business, as well as the strong momentum in Meta AI, Llama adoption, and AI-driven glasses."
The company stated that it plans to continue investing heavily in AI, with a significant increase expected in capital expenditures by 2025, especially in infrastructure spending accelerating due to higher depreciation and operational cost growth.
Earlier this month, Meta announced an expansion of the use of Meta AI to more countries including the United Kingdom and Brazil, competing with OpenAI's ChatGPT and Dall-E. Upon full launch, Meta stated that Meta AI will be available in 43 countries and 12 languages.
Zuckerberg has emphasized the company's significant investments in AI, which has to some extent changed investors' perceptions of the company.
Meta's key AI products include various large language models for supporting chatbots (LLM), AI assistants integrated into various social apps, and AI-powered smart glasses. Meta has introduced the Llama series models in its consumer and advertising products, and provides the platform as open-source software. Meta reports that companies such as Accenture, DoorDash, and Goldman Sachs are using Llama to develop their own AI software.
Zuckerberg stated, "The Llama 3 model has become a turning point in the industry. I am more looking forward to the currently in-depth development stage of the Llama 4. We are training the Llama 4 model on a cluster of over 0.1 million H100 blocks, exceeding the training scale of any other company I have seen."
"I expect the smaller Llama 4 model to be completed at some point early next year. I believe these models will have a significant impact in various aspects: new patterns, functionalities, stronger reasoning capabilities, and faster speeds. To me, open source is clearly the most cost-effective, customizable, reliable, high-performance, and easy-to-use option available to developers. I am proud of Llama leading the way in this respect."
There are reports that the company is developing the search feature of Meta AI services, allowing users to ask questions about current events and get answers, aiming to make Meta no longer rely on Google or Microsoft's search engines to answer certain user queries.
Analysts believe that although many of Meta's long-term AI investments will take several years to generate significant revenue contributions, the company has already optimized ad targeting and content recommendations through AI improvements, resulting in a more direct positive impact on business outcomes.
Jesse Cohen, senior analyst at Investing.com, said: "Meta is currently growing rapidly, and AI is apparently driving growth." However, he added: "Investors seem disappointed by the company's forward guidance and the continuously rising costs associated with developing AI capabilities."
Editor/Lambor
