Meta stock outperforms after exceeding earnings expectations and receiving positive guidance from Facebook parent company – Update

Meta Platforms (META) reported second quarter earnings after the bell on Wednesday, beating estimates on the top and bottom line and sending the company’s stock up as much as 6% in after-hours trading.

Meta’s revenue numbers came in above expectations, totaling $32 billion against the $31.06 billion estimated by Wall Street. The company also guided to revenue of $32 billion-$34.5 billion for the current quarter, more than the $31.2 billion expected by analysts.

The company reported earnings per share of $2.98, more than the $2.92 expected by analysts.

“We had a good quarter,” Meta CEO Mark Zuckerberg said in a statement. “We continue to see strong engagement across our apps and we have the most exciting roadmap I’ve seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall.”

The Facebook and Instagram parent also reported ad revenue of $31.5 billion, more than the $30.43 billion expected.

Meta’s ad impressions — key to the company’s monetization of its platforms — jumped 34% year-over-year, as the price per ad went down by 16% in that same period.

“Impression growth was primarily driven by Asia-Pacific and the rest of the world,” Meta CFO Susan Li told analysts in the company’s earnings call.

Facebook’s daily active user counts also topped expectations, as the company reported 2.06 billion as compared to estimates of 2.03 billion.

However, the company did report a wider operating loss than expected in its VR division Reality Labs. Reality Labs lost $3.74 billion in Q2, more than the $3.68 billion Wall Street expected the division to lose.

And the company expects to see these losses continue as it keeps making AR and VR investments.

In a statement, Li said, “for Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and investments to further scale our ecosystem.”

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In 2022, Reality Labs lost more than $13 billion.

The company’s newest headset, the Meta Quest 3, will be coming out in the fall, just as the VR race is getting hotter with Apple (AAPL) entering the space with its mixed-reality headset, the Apple Vision Pro, later this year.

On the company’s earnings call, Zuckerberg said that, though others are entering the space, Meta spearheaded the tech. “We pioneered mixed reality with our Quest Pro headset, and Quest 3 takes it to a whole new level,” he told analysts.

“Now, others in the industry are, of course, working on bringing mixed reality to the market too, but Quest 3 is going to be the first mainstream accessible device that we expect many millions of people will get to experience.”

Further, Meta, which laid off more than 20,000 of its employees throughout 2022 and 2023, said it expects expenses to rise, as the company anticipates higher infrastructure and payroll costs. Meta said it is evolving its “workforce composition toward higher-cost technical roles.”

Accordingly, the company said that its overall 2023 expenses will come in between $88 billion-$91 billion, higher than the previously anticipated $86 billion-$90 billion range.

AI, of course, featured in the company’s earnings call — and while it’s a huge opportunity, building and offering AI products at scale still presents a number of unknowns.

“In terms of how quickly some of these new products scale, that’s one of the big unknowns for the business,” Zuckerberg told analysts.

“One of the things we’re debating heavily [is] thinking through the amount of AI capex to bring online, because the reality is that we just don’t know how quickly these things will scale and we want to have the capacity in place in case they scale quickly.”

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

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