Meta Platforms Inc. (Nasdaq: META) reported better-than-anticipated fiscal 2024 second-quarter earnings and estimates. While posting Q2 earnings that surged 73% from a similar period last year, Meta cautioned that it anticipates a considerable increase in capital expenditures in 2025. The company also issued a better-than-expected revenue outlook for 3Q 2024. The stock of Meta ended Thursday’s trading session at 497.74, up $22.91, or 4.82%, from the prior close.
The Menlo Park, California-based company reported second-quarter revenues of $39.07 billion, an increase of 22.10% from $32 billion in the similar quarter of fiscal 2023. The reported figure reflects the fourth successive quarter of growth above 20%.
For the latest quarter, which ended on June 30, 2024, Meta posted net income of $13.47 billion, or $5.16 per share, compared with $7.79 billion, or $2.98 per share, in the quarter that ended on June 30, 2023.
Analysts surveyed by LSEG anticipated Meta to report earnings of $4.74 per share on revenues of $38.30 billion.
Commenting on the quarterly results, Meta CEO, Mark Zuckerberg, stated “We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year.”
Segment wise:
- Family of Apps (Instagram, Facebook, Messenger, and WhatsApp) revenues were $38.72 billion, up 22.05% from last year, surpassing StreetAccount Estimates of $37.70 billion. Under the Family of Apps, advertisement revenue rose by 21.70% y-o-y to $38.33 billion.
- The Reality Labs segment, which encompasses mixed reality hardware and software, recorded revenues of $353 million, up from $276 million last year. The Street was expecting revenues of $376 million. This division reported a loss of $4.49 billion, bettering forecasts of $4.53 billion. In 1Q 2024, the Reality Labs division posted losses of $3.80 billion.
During the quarter, Meta’s capital expenditure was $8.47 billion. Wall Street was expecting capital expenditures of $9.51 billion.
Meta reported expenses of $24.2 billion for the second quarter, which encompassed a $1.4 billion charge related to a recent settlement of a facial identification information lawsuit with Texas. This earnings release followed Texas Attorney General Ken Paxton’s revelation of securing a $1.4 billion payment agreement with Meta with the company’s unauthorized usage of Texans’ biometric information for the Tag Suggestions aspect.
Looking ahead, Meta expects Q3 revenues in the range of $38.50 billion to $41 billion, with $39.75 billion being the midpoint of the range. Analysts anticipate Meta to report revenues of $39.10 billion for the third quarter.
The company also reaffirmed its FY 2024 expense guidance of between $96 billion and $99 billion. Furthermore, Meta narrowed its capital expenditure outlook to a range of $37 billion to $40 billion. The lower end of the earlier guidance was $35 billion.
Meta’s financial performance continues to gain from cost-reduction measures initiated in the final leg of 2022. The enterprise reduced its workforce by approximately 21,000 jobs through several bouts of downsizing. As a result, operating income increased by 58% from the previous year, reaching $14.9 billion, and the operating margin grew to 38% from 29% during the same period.
In line with its AI advancements, Meta recently introduced the latest variant of its Llama AI model, which includes three distinct versions available to developers for free through open source. One variation of the Llama 3.1 technology features 405 billion parameters, highlighting Meta’s commitment to ensuring its technology competes with industry leaders like OpenAI and search engine giant Google.
The earnings beat and better-than-anticipated Q3 outlook are expected to keep the stock of Meta slightly bullish in the short term.
Technically, the stock of Meta, despite the worldwide market sell-off, has managed to close above its 50-day moving average. The stock is also rising after consolidating between $470 and $500. The stochastic RSI is also in the bullish zone. Therefore, we anticipate Meta’s stock to remain in an uptrend in the near term.
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