Meta stock rallied as the company reported an 11% rise in revenue on Wednesday, beating Wall Street expectations.
Revenue grew to $32bn in the quarter ending in June, compared with analysts’ average estimate of $31.12bn, marking Meta’s most profitable quarter since 2021 due in part to a massive growth in revenue from the company’s short-form video product, Reels. The news sent stocks surging by 7% in after-market trading.
“I’m really proud of our teams for everything we’ve accomplished so far this year,” Mark Zuckerberg, Meta’s CEO, said on the earnings call. “It’s been a tough year in a lot of ways. But it’s also been an impactful one. I’m quite optimistic about the road ahead.”
The earnings report continues something of a turnaround for the Facebook parent company, after a shaky rebrand and pivot to virtual reality last year as well as thousands of employee layoffs. It follows Meta’s recent launch of several new products and closely watched moves on artificial intelligence.
Meta recently introduced a new version of its open-source AI large language model, Llama, in partnership with Microsoft. But the company’s most high-profile launch has been Threads, its competitor to Twitter that quickly racked up more than 100m subscribers. Analysts are expected to have questions about whether Meta has been and will be able to maintain that momentum in the face of Twitter’s own rebranding.
“The app launched with incredible success, but questions remain on whether it can sustain momentum following its post-curiosity bump,” said Mike Proulx, the vice-president and research director at Forrester, in a statement.
Zuckerberg reiterated that despite doubling down on new efforts like AI, the company had not eased up on its investment into its namesake, the metaverse. “We remain fully committed to the metaverse vision as well.” Zuckerberg pointed to the impending release of the company’s next generation virtual reality headset, Quest 3, and said it would be Meta’s most powerful headset yet. However, the company’s Reality Labs unit saw operating losses balloon to $3.7bn and Meta expects those losses to continue to grow. The losses could prove to be a problem, analysts say.
“While Meta may be talking less about the metaverse these days, it is still determined to make the metaverse a reality, and the massive losses in its Reality Labs division are adding up,” Debra Aho Williamson, the Insider Intelligence principal analyst, said in a statement.
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Mentions of AI efforts were a boon to tech stocks last quarter but this quarter is a test of many of the tech firms’ commitments. Meta faces competition from several companies, including Open AI and Google. Still, Zuckerberg said he was optimistic about the company’s AI roadmap and said Meta would have more to share at its September event, Meta Connect.
