However, Meta also projected an increase in expenses for 2023 and 2024. These expenses would include legal fees and investments in infrastructure, which are crucial for the competitive AI race in the tech sector. The company has implemented cost-cutting measures in other areas, such as safety teams and basic business functions.
Meta’s shares rose 7.5% in after-hours trade. CEO Mark Zuckerberg expressed confidence in the company’s apps and highlighted upcoming products like Llama 2, Threads, Reels, new AI products, and the launch of Quest 3.
In the second quarter, Meta’s revenue grew by 11% to $32 billion, exceeding analysts’ estimates. Ad revenue increased by 12%, outperforming Google’s 3% growth in ad revenue. The company’s adjusted earnings per share of $2.98 also surpassed Wall Street targets.
Meta has been recovering from a challenging year, benefitting from the excitement surrounding emerging AI technology and its austerity measures that resulted in a significant reduction in employees. As a result, the company’s shares have more than doubled in value this year.
Advertisers are also increasing their digital ad spending, encouraged by signs of economic resilience despite high inflation. However, they remain cautious and prefer established platforms like Meta and Alphabet, while smaller players like Snap face challenges.
Meta did not indicate whether its revenue forecast includes sales from the newly launched Threads app, which currently lacks ads.
While Meta continues to make substantial investments in data centers and AI technology, it has reduced its capital expenditure forecast for 2023. Some AI-related costs have been shifted to 2024, when capex is expected to grow.
Zuckerberg discussed the crucial role of AI capacity in Meta’s future, particularly in categories like features for advertisers, AI agents on chat, and internal company productivity tools. He also mentioned potential revenue from Meta’s Llama 2 model and the possibility of licensing it to companies with over 700 million users.
Meta’s Reality Labs unit, responsible for metaverse-oriented technology, reported a decrease in sales and a loss of $3.7 billion in the second quarter. The unit’s costs have exceeded the $5 billion annual target set in a previous investor note.
Meta anticipates higher operating losses for the Reality Labs unit in 2024 as it continues to invest in augmented and virtual reality. Zuckerberg previously mentioned that Meta would control investments in the division after 2023.
The company expects total expenses in the range of $88 billion to $91 billion for 2023, citing legal-related expenses. Second-quarter expenses included $1.87 billion in legal costs, primarily due to a fine imposed by Ireland’s Data Protection Commissioner. Meta also anticipates increased infrastructure-related costs and higher payroll expenses as it hires more high-cost technical roles.