Meta Stock Robust Earnings Outlook
After a string of underwhelming results, Meta bounced back strongly in the second quarter. The social media giant reported a 22% increase in revenue and a 73% jump in earnings, easily exceeding Wall Street's projections.
Meta's stock price did not decline following the earnings release, a deviation from the recent trend seen with some other major tech companies.
In the company's earnings announcement, CEO Mark Zuckerberg highlighted Meta's progress, stating, "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.
The key figures surpassed analysts' consensus forecasts. Meta reported $39 billion in revenue, ahead of the expected $38.3 billion, and earnings of $5.16 per share, well above the $4.80 per share estimate.
The strong results were underpinned by continued user growth, with daily active people increasing 7% year-over-year to 3.3 billion. Additionally, ad impressions rose 10% and ad prices increased by the same percentage on average.
Overall, Meta's robust second-quarter performance has broken the company's recent jinx, providing a boost to its stock and signaling improved business momentum.
Meta's latest financial results show the company is benefiting from a significant increase in advertising sales, as advertisers redirect more of their budgets from traditional broadcast television to Meta's massive user base of over 3 billion active users.
This advertising boom has been amplified by major events in 2023 and 2024, including the Olympics and a U.S. presidential election, which typically drive higher advertising spend.
During the earnings call, Meta CFO Susan Li highlighted the company's improving capabilities in targeted advertising and ad delivery, noting that new tools have driven a 22% improvement in return on ad spend for U.S. advertisers.
The surge in ad revenues, combined with relatively modest 7% growth in costs and a decline in headcount, has led to a substantial expansion in Meta's profit margins. Operating profits widened from 29% in June 2023 to 38% in the most recent quarter.
Looking ahead, analysts had anticipated September quarter revenue guidance pointing to around 15% year-over-year growth. However, Meta's new forecast, with a midpoint of $39.75 billion, suggests the company expects to achieve 24% revenue growth in the September quarter, exceeding market expectations.