Meta’s Q3 profit grows by 35% thanks to strong ad revenue and massive AI adoption

Meta Platforms Inc., the parent company of Facebook and Instagram, showcased a strong third quarter with profits soaring by 35 per cent, driven largely by a surge in advertising revenue and a significant push towards AI integration.

The Menlo Park-based tech giant revealed a hefty $15.69 billion profit, translating to $6.03 per share, a marked improvement from the previous year’s $11.58 billion. Revenue for the quarter also experienced a solid bump, climbing by 19 per cent to reach $40.59 billion, overshooting analysts’ expectations of $40.21 billion.

The success largely stemmed from Meta’s AI-powered initiatives, which have supercharged user engagement on its platforms. AI tools have been showing users more of what they love and have made ads, especially on its short-video platform Reels, notably more effective. This AI momentum has not only drawn advertisers but also kept users more engaged, making Meta a top choice for advertisers looking to maximise their budgets.

Despite the overall solid results, user metrics slightly underperformed, with Meta’s “family daily active people” — those active on at least one of its platforms daily — falling just shy of projections at 3.29 billion for September. This miss hints that while user growth may be tapering, the company has the chance to increase revenue per user through AI-driven ad tools and personalised content.

Looking forward, Meta is optimistic yet cautious, projecting revenue between $45 billion and $48 billion for the next quarter. However, alongside these rosy forecasts, the company has flagged substantial infrastructure spending, primarily to support AI development.

CEO Mark Zuckerberg hinted at further AI advancements across its ecosystem, with a particular focus on Meta’s AI, the Llama model, and AI-enhanced wearables like smart glasses.

But the road isn’t entirely smooth. While AI is evidently propelling growth, Meta has its eyes set on next-generation tech, particularly in the Reality Labs segment, which focuses on virtual and augmented reality. Meta hinted that 2024 will see deeper losses in Reality Labs due to ongoing product development and high research costs.

One of the most intriguing projects here is Orion, the holographic AR glasses that Meta has been fine-tuning for a decade. While Zuckerberg has described Orion as a tantalising “glimpse of the future,” its production costs remain sky-high, keeping the product far from launch.

This mixed outlook seemed to leave investors a tad disappointed, with Meta’s stock slipping around 3 per cent in after-hours trading. Rising expenses tied to AI development and ambitious product plans have led some investors to question whether the company’s growth in ad revenue will be enough to offset these mounting costs. However, with AI steadily bolstering engagement and ad performance, Meta appears well-positioned to stay a dominant force in digital advertising, even as it ventures into more cutting-edge tech.