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Meta Platforms' (META) Q3 Earnings Beat, Revenues Up Y/Y
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Meta Platforms (META - Free Report) reported third-quarter 2023 earnings of $4.39 per share, beating the Zacks Consensus Estimate by 21.27%. The company had reported earnings of $1.64 per share in the year-ago quarter.
Revenues of $34.15 billion beat the Zacks Consensus Estimate by 2.07% and jumped 23.2% year over year. At constant currency (cc), the top line improved 21%.
Geographically, the Rest of the World (RoW) revenues grew 37.1% on a year-over-year basis. Asia-Pacific and the United States & Canada revenues increased 19.8% and 34.2% year over year, respectively. Performance in Europe improved, with revenues growing 16.5% year over year.
Revenues from Family of Apps (99.4% of total revenues), which includes Facebook, Instagram, Messenger, WhatsApp and other services, increased 23.7% year over year to $31.72 billion.
Meta shares were down 3.35% in after-hours trading following the third-quarter results. Its shares have outperformed the Zacks Internet Software industry year to date. While the company’s shares have gained 148.1%, the industry increased 46.4%.
Meta Platforms, Inc. Price, Consensus and EPS Surprise
Family Daily Active People or DAP, defined as a registered and logged-in user who visited at least one of the Family products (Facebook, Instagram, Messenger and/or WhatsApp) on a given day, were 3.14 billion, up 7.2% year over year.
Family Monthly Active People or MAP increased 6.7% year over year to 3.96 billion.
Advertising revenues (99.1% of Family of Apps revenues) increased 23.5% year over year to $33.64 billion and accounted for 98.5% of third-quarter revenues. At cc, revenues increased 21%.
RoW advertising revenues jumped 35.8% on a year-over-year basis. Asia-Pacific and the United States & Canada advertising revenues increased 19.5% and 17.2% year over year, respectively. Moreover, Europe’s advertising revenues surged 35.3% year over year.
Ad impressions delivered across Family of Apps increased 31% year over year, and the average price per ad decreased 6% year over year in the reported quarter. Impression growth was primarily driven by Asia-Pacific and the Rest of the World.
Online commerce was the largest contributor to year-over-year growth, followed by CPG and gaming. Online commerce and Gaming benefited from strong spending by advertisers in China.
Family of Apps’ other revenues soared 52.6% year over year to $293 million.
Reality Labs’ revenues (0.6% of total revenues) plunged 26.3% year over year to $210 million.
Facebook’s User Base Remains Strong
Monthly active users (MAUs) were 3.049 billion, up 3.1% year over year.
MAUs in Asia-Pacific, RoW and the United States & Canada grew 3.4%, 4.3% and 1.9% year over year, respectively. Europe MAUs were flat year over year.
Daily Active Users (DAUs) were 2.085 billion, which increased 5.1% year over year and represented 68% of MAUs.
Asia-Pacific DAUs increased 6.4% year over year. DAUs in RoW and the United States & Canada grew 6% and 3%, respectively. DAUs in Europe increased 1.3% year over year.
Average Revenues per User in RoW jumped 31.5% on a year-over-year basis. Asia-Pacific, Europe, and the United States & Canada increased 15.8%, 14.2%, and 33.8%, year over year, respectively.
Robust Portfolio Aids Growth
Reels have been a major growth driver for Instagram. The company stated that Reels has driven more than 40% increase in time spent on Instagram since launch and is now net neutral to overall company ad revenues. It remains focused on growing Reels as part of its overall portfolio of video services, which make up more than half of time spent on Facebook and Instagram.
AI-driven feed recommendations have been a key catalyst. Meta has witnessed a 7% increase in time spent on Facebook and a 6% increase on Instagram as a result of recommendation improvements.
AI tools for advertisers are also driving growth, with Advantage+ Shopping Campaigns reaching a $10 billion run rate. More than half of the company’s advertisers are using Advantage+ Creative tools to optimize images and text in their ads.
Business messaging is a domain where Meta is expanding through WhatsApp. Thanks to the availability of WhatsApp business, Click-to-Message ads in India doubled year over year in the third quarter of 2023.
Regarding Threads, the competitor of X (previously Twitter), has close to 100 million monthly active currently.
Moreover, the launch of Quest 3, which Meta describes as its most powerful headset and the first mainstream mixed-reality device, is expected to provide a boost to its metaverse ambitions.
The company also launched the next generation of Ray-Ban Meta smart glasses in the reported quarter.
Operating Details
In the third quarter, total costs and expenses decreased 7.5% year over year to $20.398 billion. This included restructuring charges of $380 million.
As a percentage of revenues, total costs and expenses were 59.7%, significantly down from 79.6% reported in the year-ago quarter.
In the reported quarter, Family of Apps expenses were $16.4 billion, accounting for 81% of Meta’s overall expenses. FoA expenses fell 9% year over year. Reality Labs’ expenses were $4 billion, flat year over year.
As a percentage of revenues, marketing & sales expenses decreased 520 basis points (bps), while general & administrative expenses fell 610 bps on a year-over-year basis.
Research & development expenses, as a percentage of revenues, were 27.1%, down 600 bps on a year-over-year basis.
Meta’s employee base was 66,185 at the end of the third quarter, down 24% year over year.
Operating income of $13.75 billion jumped 142.7% year over year. The operating margin was 40.3%, expanding significantly from 20.4% reported in the year-ago quarter.
Family of Apps’ operating income surged 87.3% year over year to $17.49 billion. Reality Labs reported a loss of $3.74 billion compared with the year-ago quarter’s loss of $3.67 billion.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash & cash equivalents and marketable securities were $61.12 billion compared with $53.45 billion as of Jun 30, 2023.
Long-term debt was $18.38 billion as of Sep 30, unchanged sequentially.
Capital expenditures were $6.76 billion in the third quarter compared with $6.35 billion in the previous quarter. Free cash flow was $13.64 billion compared with $10.96 billion reported in the previous quarter.
The company repurchased $3.7 billion of its Class A common stock in the reported quarter. As of Sep 30, 2023, it had $37.22 billion available and authorized for repurchases.
Guidance
Meta expects total revenues between $36.5 billion and $40 billion for the fourth quarter of 2023. Favorable forex is expected to aid year-over-year top-line growth by roughly 2%.
For 2023, the company anticipates total expenses between $87 billion and $89 billion, including an estimated $3.5 billion in restructuring charges. Capital expenditure is expected between $27 billion and $29 billion.
It continues to expect Reality Labs operating losses to increase year over year in 2023.
For 2024, Meta expects total expenses between $94 billion and $99 billion, driven by higher infrastructure costs, depreciation expenses and operating costs. Higher compensation expenses due to more higher-cost technical roles will further add to the total expense growth.
Reality Labs’ operating expenses are expected to increase meaningfully on a year-over-year basis due to Meta’s ongoing product development efforts in augmented reality & virtual reality and investments to scale its ecosystem further.
For 2024, capital expenditure is expected between $30 billion and $35 billion, driven by investments in servers, including both non-artificial intelligence (AI) and AI hardware and data centers.
Image: Bigstock
Meta Platforms' (META) Q3 Earnings Beat, Revenues Up Y/Y
Meta Platforms (META - Free Report) reported third-quarter 2023 earnings of $4.39 per share, beating the Zacks Consensus Estimate by 21.27%. The company had reported earnings of $1.64 per share in the year-ago quarter.
Revenues of $34.15 billion beat the Zacks Consensus Estimate by 2.07% and jumped 23.2% year over year. At constant currency (cc), the top line improved 21%.
Geographically, the Rest of the World (RoW) revenues grew 37.1% on a year-over-year basis. Asia-Pacific and the United States & Canada revenues increased 19.8% and 34.2% year over year, respectively. Performance in Europe improved, with revenues growing 16.5% year over year.
Revenues from Family of Apps (99.4% of total revenues), which includes Facebook, Instagram, Messenger, WhatsApp and other services, increased 23.7% year over year to $31.72 billion.
Meta shares were down 3.35% in after-hours trading following the third-quarter results. Its shares have outperformed the Zacks Internet Software industry year to date. While the company’s shares have gained 148.1%, the industry increased 46.4%.
Meta Platforms, Inc. Price, Consensus and EPS Surprise
Meta Platforms, Inc. price-consensus-eps-surprise-chart | Meta Platforms, Inc. Quote
Top-Line Details
Family Daily Active People or DAP, defined as a registered and logged-in user who visited at least one of the Family products (Facebook, Instagram, Messenger and/or WhatsApp) on a given day, were 3.14 billion, up 7.2% year over year.
Family Monthly Active People or MAP increased 6.7% year over year to 3.96 billion.
Advertising revenues (99.1% of Family of Apps revenues) increased 23.5% year over year to $33.64 billion and accounted for 98.5% of third-quarter revenues. At cc, revenues increased 21%.
RoW advertising revenues jumped 35.8% on a year-over-year basis. Asia-Pacific and the United States & Canada advertising revenues increased 19.5% and 17.2% year over year, respectively. Moreover, Europe’s advertising revenues surged 35.3% year over year.
Ad impressions delivered across Family of Apps increased 31% year over year, and the average price per ad decreased 6% year over year in the reported quarter. Impression growth was primarily driven by Asia-Pacific and the Rest of the World.
Online commerce was the largest contributor to year-over-year growth, followed by CPG and gaming. Online commerce and Gaming benefited from strong spending by advertisers in China.
Family of Apps’ other revenues soared 52.6% year over year to $293 million.
Reality Labs’ revenues (0.6% of total revenues) plunged 26.3% year over year to $210 million.
Facebook’s User Base Remains Strong
Monthly active users (MAUs) were 3.049 billion, up 3.1% year over year.
MAUs in Asia-Pacific, RoW and the United States & Canada grew 3.4%, 4.3% and 1.9% year over year, respectively. Europe MAUs were flat year over year.
Daily Active Users (DAUs) were 2.085 billion, which increased 5.1% year over year and represented 68% of MAUs.
Asia-Pacific DAUs increased 6.4% year over year. DAUs in RoW and the United States & Canada grew 6% and 3%, respectively. DAUs in Europe increased 1.3% year over year.
Average Revenues per User in RoW jumped 31.5% on a year-over-year basis. Asia-Pacific, Europe, and the United States & Canada increased 15.8%, 14.2%, and 33.8%, year over year, respectively.
Robust Portfolio Aids Growth
Reels have been a major growth driver for Instagram. The company stated that Reels has driven more than 40% increase in time spent on Instagram since launch and is now net neutral to overall company ad revenues. It remains focused on growing Reels as part of its overall portfolio of video services, which make up more than half of time spent on Facebook and Instagram.
AI-driven feed recommendations have been a key catalyst. Meta has witnessed a 7% increase in time spent on Facebook and a 6% increase on Instagram as a result of recommendation improvements.
AI tools for advertisers are also driving growth, with Advantage+ Shopping Campaigns reaching a $10 billion run rate. More than half of the company’s advertisers are using Advantage+ Creative tools to optimize images and text in their ads.
Business messaging is a domain where Meta is expanding through WhatsApp. Thanks to the availability of WhatsApp business, Click-to-Message ads in India doubled year over year in the third quarter of 2023.
Regarding Threads, the competitor of X (previously Twitter), has close to 100 million monthly active currently.
Moreover, the launch of Quest 3, which Meta describes as its most powerful headset and the first mainstream mixed-reality device, is expected to provide a boost to its metaverse ambitions.
The company also launched the next generation of Ray-Ban Meta smart glasses in the reported quarter.
Operating Details
In the third quarter, total costs and expenses decreased 7.5% year over year to $20.398 billion. This included restructuring charges of $380 million.
As a percentage of revenues, total costs and expenses were 59.7%, significantly down from 79.6% reported in the year-ago quarter.
In the reported quarter, Family of Apps expenses were $16.4 billion, accounting for 81% of Meta’s overall expenses. FoA expenses fell 9% year over year. Reality Labs’ expenses were $4 billion, flat year over year.
As a percentage of revenues, marketing & sales expenses decreased 520 basis points (bps), while general & administrative expenses fell 610 bps on a year-over-year basis.
Research & development expenses, as a percentage of revenues, were 27.1%, down 600 bps on a year-over-year basis.
Meta’s employee base was 66,185 at the end of the third quarter, down 24% year over year.
Operating income of $13.75 billion jumped 142.7% year over year. The operating margin was 40.3%, expanding significantly from 20.4% reported in the year-ago quarter.
Family of Apps’ operating income surged 87.3% year over year to $17.49 billion. Reality Labs reported a loss of $3.74 billion compared with the year-ago quarter’s loss of $3.67 billion.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash & cash equivalents and marketable securities were $61.12 billion compared with $53.45 billion as of Jun 30, 2023.
Long-term debt was $18.38 billion as of Sep 30, unchanged sequentially.
Capital expenditures were $6.76 billion in the third quarter compared with $6.35 billion in the previous quarter. Free cash flow was $13.64 billion compared with $10.96 billion reported in the previous quarter.
The company repurchased $3.7 billion of its Class A common stock in the reported quarter. As of Sep 30, 2023, it had $37.22 billion available and authorized for repurchases.
Guidance
Meta expects total revenues between $36.5 billion and $40 billion for the fourth quarter of 2023. Favorable forex is expected to aid year-over-year top-line growth by roughly 2%.
For 2023, the company anticipates total expenses between $87 billion and $89 billion, including an estimated $3.5 billion in restructuring charges. Capital expenditure is expected between $27 billion and $29 billion.
It continues to expect Reality Labs operating losses to increase year over year in 2023.
For 2024, Meta expects total expenses between $94 billion and $99 billion, driven by higher infrastructure costs, depreciation expenses and operating costs. Higher compensation expenses due to more higher-cost technical roles will further add to the total expense growth.
Reality Labs’ operating expenses are expected to increase meaningfully on a year-over-year basis due to Meta’s ongoing product development efforts in augmented reality & virtual reality and investments to scale its ecosystem further.
For 2024, capital expenditure is expected between $30 billion and $35 billion, driven by investments in servers, including both non-artificial intelligence (AI) and AI hardware and data centers.
Zacks Rank & Stocks to Consider
Currently, Meta carries a Zacks Rank #3 (Hold).
Pinterest (PINS - Free Report) , eGain (EGAN - Free Report) and Fastly (FSLY - Free Report) are some better-ranked stocks that investors can consider in the same industry. Pinterest and eGain sport a Zacks Rank #1 (Strong Buy) each, while Fastly has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Pinterest shares have gained 5.3% year to date. PINS is set to report its third-quarter 2023 results on Oct 30.
eGain shares have declined 34.3% year to date. EGAN is set to report its first-quarter fiscal 2024 results on Nov 2.
Fastly shares have gained 73.6% year to date. FSLY is set to report its third-quarter 2023 results on Nov 1.