Meta Platforms benefits from more and more expensive advertising
The Facebook Group continues to grow in terms of advertising and users. Forecasts are clearly exceeded. The metaverse and the AI infrastructure cost billions.
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Meta Platforms records significant leaps in turnover and profits. Although the number of daily active users across all platforms is only increasing moderately, the Group is playing out more advertising, which has also been sold at a higher price. Meta uses this to finance the servers required for artificial intelligence (AI) and the Metaverse, which consumes almost 1.5 billion US dollars per month. As a result of exceeding expectations and a positive outlook, the share price jumped sharply.
Analysts had expected revenue of 38.3 billion dollars for the second quarter of 2024, but the Facebook Group increased this to 39.1 billion dollars. This is 22 percent more than in the same period last year, when Meta was also able to sell a lot more advertising. As costs have risen by just 7 percent in the last three months, Meta Platforms has increased its operating profit by 58 percent year-on-year to 14.85 billion dollars. Net profit grew even more strongly in the same period, namely by 73 percent to 13.5 billion dollars.
The main reason for Meta's positive quarterly result is likely to be the development of advertising. Meta played out 10 percent more advertising across all apps, with the average price per ad also 10 percent higher than in the previous year. This led to a 22% increase in advertising revenue and is essential for Meta Platforms, as 98% of the Group's revenue comes from advertising. Facebook and Instagram are the Group's largest advertising platforms. In comparison: Google recently increased its advertising revenue by 11 percent.
More users, slightly fewer employees
In the past, Meta Platforms listed daily and monthly active users of the Facebook and Messenger apps, but now only lists the total number of daily active users of all platforms combined. This figure has risen by 7 percent year-on-year to 3.27 million daily users. At the same time, the Group has further reduced the number of employees, although there have been no major waves of redundancies recently. In June, it was reported that there would be restructuring and redundancies at Reality Labs, but a "relatively small number of jobs" were to be cut. Meta now has 70,799 employees, one percent fewer than last year.
Alongside employees, Reality Labs is one of the biggest cost factors at Meta Platforms. This is where the Metaverse and virtual reality products are developed, both hardware and software. It is one of Meta CEO Mark Zuckerberg's hobbyhorses, but only generated a turnover of 389 million dollars in the last quarter – with an operating loss of 4.49 billion dollars.
Outlook boosts the share price
Another major cost factor is Meta's server infrastructure. In addition to operating the platforms for billions of users, there are now AI functions that require computing time. The Group does not provide any figures, but infrastructure costs will continue to rise next year and represent a significant cost driver when the servers are modernized and expanded. There will also be investments in AI development and research.
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Meta expects sales of between 38.5 and 41 billion dollars for the third quarter, which started at the beginning of July. This would be 13 to 20 percent more than in the previous year, when Meta significantly increased sales and profits and already exceeded expectations. As market observers had expected 39.1 billion dollars in the current quarter, according to CNBC, this was welcomed on the stock market. Meta shares climbed by just over 7 percent in after-hours trading, having already gained 34 percent in value this year.
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