Meta Platforms, the parent company of Facebook, reported second-quarter (April to June) earnings that exceeded market expectations. Future earnings forecasts also surpassed expectations, leading Meta's stock price to surge about 7% in after-hours trading.
On the 31st of last month (local time), Meta announced its second-quarter earnings after the New York Stock Exchange closed, reporting revenue of $39.07 billion and earnings per share of $5.16. These figures surpassed Wall Street estimates compiled by market research firm LSEG, which projected $38.31 billion in revenue and $4.73 in earnings per share. Second-quarter revenue increased approximately 22% year-over-year. Meta's quarterly revenue has recorded growth in the 20% range for four consecutive quarters. Net income was $13.47 billion, up 73% compared to the previous year.
Specifically, the company confirmed a trend of expanding market share in its core business of digital advertising. Advertising revenue generated from Facebook, Instagram, and other platforms increased by 22% compared to one year ago. Earlier, Alphabet's YouTube advertising revenue, which was released first, had fallen short of Wall Street expectations. Additionally, the Reality Labs segment, which includes the metaverse, posted a loss of $4.48 billion. As a result, losses in this segment have expanded to $50 billion since the second half of 2020.
Second-quarter expenses totaled $24.2 billion. The company confirmed that this includes $1.4 billion in litigation costs related to biometric privacy lawsuits recently settled with the state of Texas. Capital expenditures for building AI infrastructure and other investments in the second quarter amounted to $8.47 billion, which was below analysts' estimates of $9.51 billion. Meta confirmed that its spending outlook for this year remains unchanged at $96 billion to $99 billion.
Furthermore, the daily active users (DAP) of Facebook and other messenger apps reached 3.27 billion, matching estimates from StreetAccount. As of June 30, the number of employees was 70,799, a 1% decrease compared to the previous year. Meta has conducted several rounds of restructuring since the second half of 2022 due to cost-cutting pressures.
On the same day, Meta provided third-quarter revenue guidance of $38.5 billion to $41 billion. The midpoint of $39.75 billion exceeds analysts' expectations of $39.1 billion. Regarding future AI investment plans, which investors have been closely watching amid the spread of so-called AI bubble concerns, Meta confirmed that "there will be a significant increase in capital expenditures in 2025." Amid growing concerns on Wall Street about when profitability will materialize from the large-scale AI investments by big tech companies, Google, Microsoft, and Meta, all entering the earnings season, have emphasized plans to expand capital expenditures.
Mark Zuckerberg, Meta's Chief Executive Officer (CEO), stated, "We had a strong quarter, and Meta AI, the AI assistant introduced last year, is on track to become the most widely used AI assistant in the world by the end of the year." He added, "We launched the first frontier-level open-source AI model, and the Ray-Ban Meta AI glasses continue to receive positive feedback," expressing confidence that "we are also seeing good growth across our apps." Previously, Meta had open-sourced the latest AI model LLaMA 3.1, which uses NVIDIA's H100 graphics processing units (GPUs).
Meta's stock price surged. After closing the regular session of the New York Stock Exchange up 2.51%, Meta was trading nearly 7% higher in after-hours trading. Signals of a rate cut in September confirmed at the Federal Open Market Committee (FOMC) meeting of the Federal Reserve, along with a slowdown in private employment data, also contributed to upward pressure on stock prices. Not only Meta but also major tech stocks such as NVIDIA (12.8%), Tesla (4.24%), and Amazon (2.90%) closed the regular session of the New York Stock Exchange with gains.
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