Meta Releases Report Showing Faster Growth in Digital Ads Business in Q3
Meta reported faster growth in its core digital ads business for the third quarter of 2023 with 23% increase in revenue as clients rebounded from a tough 2022, when revenue dropped for three straight quarters. Sales jumped from $27.71 billion a year earlier. Net income rose 164% to $11.58 billion, or $4.39 a share, from $4.4 billion, or $1.64 a share, a year earlier.
The report said Meta’s business is outperforming competitors. Google parent Alphabet said in its earnings report Tuesday that ad revenue increased about 9.5%, while smaller rival Snap reported revenue growth of 5%.
A big part of Meta’s reacceleration appears to be because it is furthest along in terms of improving the effectiveness of its online ads following Apple’s iOS privacy changes in 2021, which made it hard for app developers to target users. Meta has pointed to its hefty investments in artificial intelligence as a key technology that has helped it land retailers looking to serve customers targeted promotions.
Mark Zuckerberg, Meta CEO said on the earnings call that so far this year, the company has seen a 7% increase in time spent on Facebook and a 6% bump on Instagram “as a result of our recommendation improvements.”
Susan Li, Meta’s finance chief, stated that online commerce was the biggest contributor to year-over-year growth in ad revenue, followed by consumer-packaged goods and gaming.
However, Li said the company widened its revenue guidance range for the fourth quarter because of unpredictability in the Middle East due to the Israel-Hamas war.
“We have observed softer ads in the beginning of the fourth quarter, correlating with the start of the conflict, which is captured in our Q4 revenue outlook, It’s hard for us to attribute demand softness directly to any specific geopolitical event,” Li mentioned.
Meta said it expects revenue of $36.5 billion to $40 billion in the current quarter. Analysts were expecting sales for the quarter of $38.85 billion, according to LSEG. At the midpoint of the range, growth in the quarter will be about 19% higher from a year earlier.
Meta said expenses for 2023 will be in the range between $87 billion and $89 billion, which is down from its previous forecast of $88 billion to $91 billion. Expenses for 2024 will fall in the range between $94 billion and $99 billion.
“In terms of investment priorities, AI will be our biggest investment area in 2024, both in engineering and computer resources,” Zuckerberg stated.
Meta’s Reality Labs division, which focuses on virtual reality and augmented reality technologies, racked up $3.74 billion in operating losses for the quarter. It has now lost close to $25 billion since the start of last year — that’s after releasing its Quest 3 headset and other new products.
“I’m proud of the work our teams have done to advance AI and mixed reality with the launch of Quest 3, Ray-Ban Meta Smart Glasses and our AI studio,” Zuckerberg added.
(ME)