Shares of Meta Platforms, Inc. (NASDAQ: META) jumped nearly 8% on Thursday after the social networking giant posted strong financial results for the second quarter.
The company reported a revenue of $32 billion for Q2, surpassing the analysts’ forecast of $31.1 billion. Moreover, Meta Platforms stunned investors with a bullish outlook, projecting sales in the current quarter to range between $32 billion to $34.5 billion, surpassing average estimates.
The second-quarter net income was reported at $7.8 billion, or $2.98 per share, outperforming the average analyst estimate of $2.92. The company states that over 3 billion individuals use at least one of Meta products daily.
The driving force behind this phenomenal performance is Meta’s successful migration of advertisers to its new Reels short-video feature. Reels, similar to TikTok format, have been instrumental in attracting more users to Meta’s social networks, Facebook and Instagram. The increased user engagement has also reignited advertiser spending after a downturn in 2022.
Meta’s Chief Executive Officer, Mark Zuckerberg, refers to this period as the “year of efficiency,” marked by significant job cuts and team restructuring. This strategy has been met with resounding investor approval, reflected in the stock price more than doubling this year.
Meta’s commitment to artificial intelligence (AI) has been unwavering. The company has heavily invested in AI to enhance user experience by tailoring content and advertising to individual interests, yielding impressive results.
Despite the efficiency mandate, Meta’s investments in artificial intelligence and virtual reality remain costly, with total expenses projected to reach $88 billion to $91 billion in 2023, surpassing previous estimates.
Meta’s Reality Labs division, responsible for bringing Zuckerberg’s metaverse vision to life, is forecasted to incur significant losses in 2023 due to product development and technology expansion.
Meanwhile, Meta’s established social networks, Facebook and Instagram, have shown slower growth rates. Therefore, the company is focused on increasing user engagement across its networks while exploring new ventures.
One such venture is Meta’s newly-launched Threads, a competitor to Twitter. Threads achieved a remarkable milestone by amassing 100 million users within days of its launch. However, retaining these users has proven challenging, according to web analytics firm Similarweb.
Despite its initial ad-free status, Threads holds promising potential for Meta’s long-term business growth. Analysts predict it could generate approximately $8 billion in annual revenue over the next two years and potentially attract close to 200 million daily active users.
Mark Zuckerberg has publicly stated that advertising will not be introduced to Threads until it reaches a milestone of 1 billion users, a target never attained by Twitter.