Meta Platforms on Wednesday reported third quarter earnings ahead of expectations, powered by a 19% revenue increase. But Meta stock dipped in Thursday trading as Chief Executive Mark Zuckerberg pledged to keep up the company's big spending on AI and the metaverse.
The social media giant said it earned $6.03 per share on sales of $40.6 billion for the September-ended quarter. Analysts polled by FactSet projected the Menlo Park, Calif.-based company would post earnings of $5.22 per share on sales of $40.2 billion.
"This was a good quarter with strong product and business momentum and with parts of our long-term vision around AI and the future of computing coming into sharper focus," Zuckerberg said on a call with analysts. "We estimate that there are now more than 3.2 billion people using at least one of our apps each day, and we're seeing rapid adoption of Meta AI and Llama, which is quickly becoming a standard across the industry.
For the current quarter, Meta guided for sales of $46.5 billion at the midpoint of its range. Analysts were expecting fourth-quarter revenue of $46.18 billion for the December-ending quarter, according to FactSet.
On the stock market today, Meta stock shed 4% to close at 567.58.
Meta Expects 'Significant' CapEx Growth in 2025
With Meta stock ahead nearly 70% already this year, the revenue growth may have failed to wow investors. Meanwhile, Meta pledged to keep up big capital expenditure investments that already made some investors queasy earlier this year.
Meta Chief Financial Officer Susan Li said in a news release that Meta now expects to spend between $38 billion and $40 billion on capital expenditures this year, a slight uptick from the previous range of $37 billion to $40 billion. While the company did not provide an estimate for next year's capex, Li said in a news release that Meta "continue(s) to expect significant capital expenditures growth in 2025."
On the other hand, Meta slightly decreased its estimates for total 2024 expenses to $97 billion at the midpoint of its range, compared to a previous $97.5 billion.
On the call the analysts, Zuckerberg said there are several opportunities to use AI to improve Meta's core business.
"So I think we should invest more there," Zuckerberg said. "And second, our AI investments continue to require serious infrastructure, and I expect to continue investing significantly there too."
Meta Q3 Results By The Numbers
Meanwhile, the third quarter marked another strong one for Meta's all-important Family of Apps business. The "daily active people" across Facebook, Instagram, Messenger, WhatsApp and Threads reached 3.29 billion, up 5% year over year.
Advertising impressions on those platforms increased 7% year over year while the average price per ad increased 11%. That added up to advertising revenue of $39.9 billion for the third quarter, up 18.5%.
Reality Labs, meanwhile, recorded $270 million in sales, up 28.5%. Still, the division posted an operating loss of $4.4 billion compared to a $3.7 billion loss for the same period in 2023. Meta's Family of Apps business, meanwhile, posted an operating profit of $21.8 billion.
Li said in the news release that Meta expects operating losses from the metaverse-focused Reality Labs division to continue to "increase meaningfully" year over year.
Analysts See 'Impressive' Results
Jefferies analyst Brent Thill reiterated a buy rating and 675 price target for Meta stock following the report.
"Q3 results were impressive with Meta now sustaining 20%+ (excluding foreign exchange) revenue growth for five straight quarters, with a 43% Q3 operating income margin the highest since Q2 2021," Thill wrote in a client note. "There are now over 1 million advertisers using Meta's suite of Gen AI ad tools (vs. est. 10M+ total advertisers) indicating a substantial lead vs. competitors."
William Blair analyst Ralph Schackart said in a client note that Meta stock's decline late Wednesday and Thursday is likely because of high expectations coming into the report.
"With basically an in-line revenue quarter and a guide that was also below elevated investor expectations, this was not enough, in our view, to move the shares higher," wrote Schackart, who holds an outperform call on Meta. "We still continue to be positive on its AI adoption and benefits to advertisers and believe Meta will be a long-term AI leader."
CFRA analyst Angelo Zino reiterated a buy rating in a client note following the report late Wednesday.
"We note Q4 revenue guidance points to a deceleration of 17%-18% growth, but is above our view, and we think it's extremely impressive amid very challenging comparisons," Zino wrote. "Operating margin of 43% expanded from 40% and was well ahead of our high-30s estimate, with rising depreciation/cost of revenue from greater infrastructure spend while SG&A (selling, general, and administrative expenses) continues to be well managed.
Meta Stock: Technical Ratings
Prior to earnings, Meta fell a fraction to 591.80 in Wednesday trading. Shares had gained 68% this year and 100% in the past 12 months.
Coming into the report, Meta stock had an IBD Composite Rating of 98 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Meta's IBD Relative Strength Rating was 94 out of 99.
