Meta Platforms Inc. shares are clawing their way back to levels last seen about a year-and-a-half ago after the social media company reported strong results for the second quarter and gave an optimistic outlook for the current period.
(Bloomberg) — Meta Platforms Inc. shares are clawing their way back to levels last seen about a year-and-a-half ago after the social media company reported strong results for the second quarter and gave an optimistic outlook for the current period.
Having already more than doubled this year, Meta’s stock was up more than 10% in premarket trading in New York. Wall Street punished the company in February 2022 for missing revenue estimates and reporting its user base stopped growing, but now is cheering results that indicate costs are under control and advertising revenue and subscriber growth were better than expected.
The company is betting on Reels — short-form videos that are similar to those on rival TikTok — to draw more attention to its social networks, Facebook and Instagram. The format has succeeded in increasing usage and is now also helping draw advertisers, reigniting their spending after an industry-wide budget tightening in 2022. Meta’s revenue could grow as much as 20% in the current quarter, the company said Wednesday.
At the same time, Meta has been cutting thousands of jobs and teams in what Chief Executive Officer Mark Zuckerberg calls its “year of efficiency,” putting the company on stronger footing with its shareholders. Even plans to increase spending over the next two years, as it invests heavily in strategic areas like artificial intelligence and virtual reality, didn’t damp investor enthusiasm for the stock.
Read more: Meta’s Improved Ad Sales Buy Time for Zuckerberg’s Metaverse
Meta reported second-quarter revenue rose 11% to $32 billion, compared with analysts’ average projections for $31.1 billion. Sales in the current quarter will be as much as $34.5 billion, also topping average estimates. Net income in the second quarter was $7.8 billion, or $2.98 per share, compared with the $2.92-per-share average analyst estimate.
More than 3 billion people use at least one of Meta’s products every day, the company said, though Meta’s established social networks have continued to grow at a slower rate. The company is working to increase the amount of time each user spends on its networks, while betting on new ventures.
The Reality Labs division, which is in charge of realizing Zuckerberg’s vision for the metaverse, will have “meaningfully” greater losses this year than it did last year, the company said, citing the costs of product development and growing the technology. Meta said total expenses will be $88 billion to $91 billion in 2023, more than prior projections.
“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, an analyst at Insider Intelligence, wrote in a note.
Instagram recently introduced a competitor to Twitter, called Threads. In the first few days after launch, Threads soared to 100 million users, though has since struggled to get all those users to return, according to estimates from web analytics firm Similarweb.
For now, Threads is ad-free, but it may boost the business long-term. Mark Mahaney, an analyst with Evercore, has estimated that Threads could generate about $8 billion in annual revenue over the next two years and reach close to 200 million daily active users. Zuckerberg has said he won’t add advertising to Threads until it’s on a path to 1 billion users — a milestone Twitter never accomplished.
–With assistance from Subrat Patnaik.
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