Meta had a great quarter, thanks to ad revenues. Mark Zuckerberg then sent its shares tumbling down

In a somewhat unexpected twist following an otherwise positive earnings report, Meta Platforms, the tech giant previously known as Facebook, delivered a cautionary message regarding the precarious nature of its advertising business. During an investor call, Susan Li, the company’s Chief Financial Officer, highlighted the significant impact of macroeconomic factors on Meta’s advertising fortunes, leading to a slump in the company’s stock prices by around 3 per cent during extended trading. Things go up, things go down This announcement comes on the heels of Meta’s apparent recovery from challenges that marred its ad business last year. The company reported third-quarter sales of $34.2 billion, surpassing the average analyst prediction of $33.5 billion. Earlier this year, Meta undertook extensive restructuring, including the reduction of its workforce and the streamlining of its projects. These measures aimed to refocus the company’s efforts on enhancing its advertising capabilities and AI-driven algorithms. Interestingly, discussions about the Metaverse, the virtual reality concept that led to the company’s rebranding under CEO Mark Zuckerberg’s guidance, have receded from the forefront of Meta’s agenda, particularly in the context of an investor community that harbours scepticism about the concept. Advertising is still at Meta’s Core Despite these strategic shifts, Meta’s core advertising business is experiencing growth. The company has been promoting short-form video content known as Reels on Instagram and Facebook to boost user engagement. However, advertisers are taking some time to adapt to this new format, which has implications for the company’s revenue outlook for 2024, a point of concern for Chief Financial Officer Susan Li. Investors have also closely monitored Meta’s investments in projects related to virtual reality and artificial intelligence technology. On Wednesday, the tech giant revised its spending projections for 2023 to a range of $87 billion to $89 billion. This cost-cutting approach has helped Meta increase its operating margins from 20 per cent in the same period the previous year to an impressive 40 per cent. The company posted third-quarter earnings per share of $4.39, a significant improvement from $1.64 in the preceding year. Looking ahead to 2024, Meta foresees expenses rising to a range between $94 billion and $99 billion. The bulk of these resources will be allocated to expanding the company’s technological infrastructure to support the development of complex AI and VR tools. Moreover, Meta plans to hire more employees for specialized, higher-cost technical roles essential for the creation of these products. What about Meta’s AI or Metaverse? As for AI, Meta has adopted a distinctive approach compared to other major tech companies. Instead of monetizing its AI advancements, Meta offers its research and large language models, which power AI chatbots, for free use by developers. This open strategy is seen as a way to accelerate technology improvement. In a notable shift during its developer conference in September, Mark Zuckerberg, the CEO of Meta, expanded his commitment to the metaverse to include augmented reality, which superimposes computer-generated imagery onto the real world. The company also introduced an updated version of its smart glasses, developed in partnership with eyewear manufacturer Ray-Ban, as well as its new VR headset, the Quest 3. Meta’s Reality Labs division, responsible for smart glasses and headsets, reported an operating loss of $3.7 billion on $210 million in revenue. Analysts had anticipated a slightly greater operating loss of $3.94 billion on revenue totalling $313.4 million, on average. Despite these financial considerations, Meta’s overall monthly user base expanded by 7 per cent to 3.14 billion in the last month of the quarter, surpassing the estimated 3.05 billion as predicted by analysts. The company continues to navigate a landscape of opportunities and challenges as it seeks to maintain its position at the forefront of the technology industry.