Meta shares rose by about 7% on Wednesday, July 31, during extended trading after the technology giant released data on income and revenue figures for the second quarter of the current year, which exceeded Wall Street’s preliminary expectations, and announced its forecast for the present quarter, which turned out to be more optimistic compared with the assumptions of analysts.
Facebook’s parent company’s revenue for April- June 2024 was fixed at $39,07 billion. This indicator showed an increase of 22% compared to the result for the second quarter of 2023. It is worth noting that the technology giant has recorded revenue growth exceeding 20% for the fourth quarter in a row. The preliminary LSEG estimate provided that the specified figure for April- June 2024 would amount to $38.31 billion.
The technology giant’s net income for the second quarter of the current year was fixed at $13.47 billion. This indicator increased by 73% year-on-year. Earnings per share amounted to $5.16. At the same time, the preliminary assessment of LSEG provided that the corresponding indicator for the results of the second quarter of 2024 would be fixed at $4.73 per equity.
Meta predicts that its revenue for July-September of the current year will range from $38.5 billion to $41 billion. At the same time, Wall Street analysts assumed that this forecast of the technology giant regarding the expected financial results of its activities would focus on a figure of $39.1 billion.
The Meta results for the second quarter of the current year are a kind of reflection of the tendency of the company’s increasing share in the digital advertising market. It is worth noting that the mentioned commercial space is currently the main source of earnings for the technology giant. Also, the advertising market continues to be one of the major activities of the company. In this case, Facebook and Instagram among other apps in the Meta virtual ecosystem demonstrate the greatest effectiveness in terms of the earnings received in the specified commercial space. Advertising revenue on the mentioned digital platforms in the second quarter of 2024 showed an increase of 22% year-on-year. It is worth mentioning that last week Alphabet, one of Meta’s main competitors, reported an increase in earnings in the same line of business. Google’s advertising sales in the second quarter of 2024 grew by 11% year-on-year.
Meta Chief Financial Officer Susan Li told analysts during a phone call that the technology giant continues to see a healthy global demand for advertising. According to her, the company is currently benefiting from a multi-year project to use artificial intelligence to improve targeting, ranking, and delivery systems for digital ads on its platforms. The technology giant expects the mentioned tools to continue to drive growth over the next two years. At the same time, more time is needed to monetize new functions of generative artificial intelligence, including, for example, chat assistants.
Meta also released information according to which the volume of expenses of the technology giant for April-June of the current year amounted to $24.2 billion. This case also takes into account the costs associated with the agreement to settle a lawsuit by the State of Texas over facial recognition data for $1.4 billion.
Moreover, the technology giant, reported that its capital expenditures for the second quarter of 2024 amounted to $8.47 billion. It is worth noting that Wall Street analysts predicted that this figure would be fixed at $9.51 billion.
The technology giant’s spending forecast for the current year remains stable, showing no changes. The company expects that the corresponding figure will range from $96 billion to $99 billion. The technology giant has also narrowed the range the capital expenditures. Currently, the appropriate figure ranges from $37 billion to $40 billion.
User activity observed on virtual platforms included in the digital ecosystem of the technology giant continues to be high. During the second quarter of 2024, the daily number of active users on the mentioned platforms was 3.27 million people. This indicator corresponds to StreetAccount estimates. In the past, Meta has reported daily and monthly active user numbers in its Facebook and Messenger apps. Currently, the company publishes data on the total number of users on all virtual platforms included in the digital ecosystem of the technology giant.
The positive financial performance of Meta is largely the result of the implementation of measures aimed at reducing costs. The technology giant began to follow a corresponding strategy at the end of 2022. As part of the cost reduction measures, the company has eliminated a total of about 21,000 jobs.
The technology giant’s operating income for April-June of the current year amounted to $14.9 billion. This indicator increased by 58% compared to the result recorded in the same period last year. The technology giant’s operating margin in the second quarter of 2024 was 38%. A year earlier, the mentioned figure was fixed at 29%.
As of June 30, Meta had a headcount of 70,799. This indicator decreased by 1% year-on-year.
It is worth noting that the implementation of a large-scale cost reduction plan does not negate the fact that the technology giant is involved in large-scale financing of certain areas of its activities. In this case, the area of advanced technologies should be mentioned. The company spends significant amounts of financial resources on artificial intelligence and virtual and augmented reality technologies. The corresponding efforts, which can also be described as a kind of economic action, are aimed at supporting the implementation of the metaverse project. It is also worth noting that within the framework of the current configuration and the condition of the material progress of human civilization, AI is the main driving force of subsequent development. Artificial intelligence is gradually becoming the main technology of modernity, the large-scale spread of which will have consequences in the space of the economy, the political environment, and the cultural dimension of the matter of human existence. Also, many experts, including futurologists, predict that AI will eventually surpass the human mind in terms of cognitive abilities. For example, SoftBank chief executive officer Masayoshi Son predicts that in ten years there will be such a configuration of artificial intelligence that will be 10,000 times smarter than the people.
Against the background of the significant existing potential of AI and even more significant prospects for its evolution, it is obvious that technology giants cannot ignore virtual thinking systems, which are likely to form an expanded space of possibilities.
Meta is currently actively investing in data center infrastructure and computing resources. The company CEO Mark Zuckerberg says that appropriate financial injections are necessary in order to stay ahead of the competition. This is a fair thesis, because, against the background of the development of advanced technologies and the scaling up of their use, there is an increase in the need for computing power. Those companies that will have wider access to the specified resource or even own computing functional facilities will find themselves in a more advantageous position in the future.
Mark Zuckerberg described the second quarter of the current year as a strong one for the technology giant. He also predicts that by the end of this year, Meta AI will become the most popular digital assistant based on artificial intelligence on a global level. In the context of listing the technology giant’s achievements in the AI area, Mark Zuckerberg noted that his company has developed the first frontier-level open-source artificial intelligence model. Separately, he underlined that Ray-Ban Meta AI glasses are still a success. Also, according to him, the technology giant provides significant growth across its apps.
On Wednesday, Meta announced that plans for next year are still being clarified. The company expects its capital expenditure volumes to show significant growth in 2025. The corresponding forecast is related to the intentions of the technology giant to continue investing in support of research in the area of artificial intelligence and product development.
This year, Mark Zuckerberg announced that by the end of 2024, Meta’s computing infrastructure will include 350,000 Nvidia H100 graphics cards, expensive computer chips that are used to train large language models and are necessary for the functioning of machine intelligence software. He also noted that the computing infrastructure of the technology giant will contain almost 600,000 calculations in the equivalent of H100 if other graphics processing units are applied, which in monetary terms amounts to several billion dollars.
Last week, Meta presented a new version of its artificial intelligence model called Llama. This model has three modifications that developers can use through open-source code as part of free access. One of the mentioned modifications, called Llama 3.1, contains 405 billion parameters. This indicator reflects the size and capabilities of the artificial intelligence model.
Meta is currently making significant efforts for its development in the machine intelligence industry. The technology giant strives to ensure that its artificial intelligence-based products are not inferior in terms of capabilities to what its competitors offer, including, in addition to Alphabet, OpenAI. It is worth noting that in the future, AI will determine the overall competitiveness of the company, and will not be an indicator of its prospects in a separate segment of activity. For this reason, the most favorable future scenarios will be relevant for firms with the most powerful and affordable artificial intelligence models.
Since the beginning of the current year, Meta shares value has risen by 34%. This rate of increase is twice as high as the intensity of Nasdaq growth. After hours, the value of the technology giant’s securities rose by 6.9%, reaching $507.45 per equity.
The positive financial performance of Meta was released after similar indicators of some other technology giants testified that the result of investing in artificial intelligence may materialize later than Wall Street’s preliminary expectations provide.
At the same time, companies continue to actively finance projects related to the development of AI and the elaborating of digital products based on advanced technology. The significant prospects for artificial intelligence exceed the possible delays in obtaining a result from the mentioned investment. For example, Microsoft intends to spend more money in the current fiscal year on building out a machine intelligence infrastructure. Alphabet warned last week that its capital spending would remain at a high level until the end of the current year.
Debra Aho Williamson, founder of research firm Sonata Insights, says that the Meta results for the second quarter of 2024 are a bellwether for stocks of companies that operate in the artificial intelligence industry. According to her, high performance in the main business lines of the technology giant will help improve investors’ assessment of financial injections into machine intelligence.
Meta reduces the number of the workforce, but at the same time hires artificial intelligence engineers. This fact reflects the priorities of the technology giant.
The metaverse project, which is a very ambitious intention to form something like an autonomous virtual space characterized by multifunctionality, can be called a large-scale action plan focused on strategic results, rather than tactical victories, which often turn out to be insignificant over a long distance.
Meta’s unit Reality Labs records quarterly losses of $4.5 billion. It is worth noting that this unit specializes in the development of the metaverse. Also, in this case, the elaboration of virtual and augmented reality technologies is carried out. Meta does not perceive losses as a signal of the need to stop activities related to the metaverse. The company is convinced that over time appropriate efforts will generate significant results. This is the right bet from the point of view of strategic thinking, although the materialization of a positive result is not guaranteed, but any ambitious project contains certain risks that are inferior to more significant prospects.
In October 2021, the new Meta brand was officially announced. The old Facebook name has been replaced. The rebranding in a symbolic sense has become evidence of the technology giant’s focus on the development of virtual space as a kind of functional environment existing within the material being, which is gradually becoming what can be described as a digital form of life in the broad sense of the corresponding formulation. At the same time, Meta continues to be primarily a social media giant. The functioning of the corresponding virtual platforms in the context of financial results forms a kind of material base for the implementation of the metaverse project.
After the rebranding, the technology giant faced a selloff of stocks. This negative circumstance was aggravated by the fact that, against the background of the deteriorating macroeconomic situation, advertisers began to shrink their expenses. Over time, the situation has improved. Stocks have returned to a growth trajectory. The multi-vector dynamic of recent years can be interpreted as the fact that the metaverse can become a reality in the originally conceived configuration, despite various difficulties that are temporary circumstances, but not a strategic obstacle.
