Meta, the parent company of Facebook, reported revenues for the third quarter of 2024 that slightly exceeded expectations. However, increasing losses in its AI and metaverse divisions resulted in a decline of more than 3% in its stock price during after-hours trading. Nevertheless, Meta’s stock has appreciated by 67% since the beginning of the year, making it one of the best-performing stocks in the S&P 500 index.

Earnings Report Highlights and Concerns

● Revenue and Net Profit

Meta's third-quarter revenue reached $40.589 billion, representing a 19% increase from $34.146 billion in the same period last year, thereby surpassing Wall Street analysts' expectations of $40.29 billion. The net profit was $15.688 billion, which is an increase of 35% from $11.583 billion a year earlier; however, this marks the lowest year-over-year net profit growth since the second quarter of 2023. Additionally, earnings per share stood at $6.03, exceeding analysts’ expectations of $5.25.

● Advertising Performance

In the third quarter, Meta’s advertising revenue totaled $39 billion, reflecting an 18.7% year-over-year increase and accounting for 98.3% of the company's total revenue. Despite this strong growth in advertising, the rate of increase in the Asia-Pacific region has slowed, with growth recorded at 15%, down from 28% in the previous quarter.

● Metaverse Business Losses

The report indicated that losses in Meta's metaverse division, Reality Labs, reached $4.42 billion in the third quarter, while revenues were only $270 million, significantly below analysts' expectations of $310 million.

Increased Capital Expenditure Expectations

CEO Mark Zuckerberg noted during the earnings call that while investments in AI have bolstered advertising revenue, they have also contributed to increased losses. Furthermore, the company cautioned that it anticipates "substantial increases" in operational losses for both the metaverse and AI sectors. Additionally, capital expenditures are expected to rise significantly by 2025, particularly in infrastructure and other projects, such as metaverse and AI glasses.

Meta forecasts total revenues for the fiscal year 2024 to range between $45 billion and $48 billion, with a median estimate of $46.5 billion, which is slightly higher than the market expectation of $46.3 billion. On the expenditure front, Meta projects total spending for the current fiscal year to be between $96 billion and $98 billion, down from the previous forecast of $96 billion to $99 billion. It expects capital expenditures for the year to be between $38 billion and $40 billion, which represents an upward revision from the earlier expectation of $37 billion to $40 billion. Additionally, capital expenditures for the year 2025 are projected to experience "significant growth."

Market Reaction

Following the earnings announcement, Meta's stock price initially dropped by over 3% in after-hours trading but later narrowed the decline to within 3%. This reaction reflects market concerns regarding Meta’s substantial future investments and widening losses. Despite the strong performance in advertising revenue, the losses from Reality Labs and increased capital expenditures have cast a shadow over the company’s financial outlook. Furthermore, investors express apprehension over Meta’s significant losses in AI and the metaverse, as well as the anticipated rise in future capital expenditures. This underscores the need for Meta to balance its pursuit of long-term technological leadership with short-term financial health.

How to Invest Using uSMART

After logging into the uSMART HK app, click on the "Search" option located at the top right of the page. Enter the stock code, such as " META " to access the details page where you can review transaction details and historical trends. Then, click on the "Trade" option at the bottom right corner, select the "Buy/Sell" function, and finally fill in your transaction conditions before submitting your order.