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| Meta's introduction of ads on its TikTok rival Reels and the potential for putting ads on Threads has some analysts optimistic |
Meta's Shares Soar as Earnings Exceed Expectations
Meta reported a remarkable profit of $13.5 billion for the most recent quarter, surpassing market predictions and driving a significant rise in its share price.
The parent company of Facebook and Instagram announced a revenue of $39 billion for the quarter, marking a 22% increase from the same period last year.
"We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year," said Meta founder and CEO Mark Zuckerberg.
Following the earnings announcement, Meta shares surged over 4%, reaching $495.30 in after-market trading.
Balancing Profits and Investments
The impressive profit comes despite a $4.5 billion loss from Meta's Reality Labs unit, which focuses on virtual and augmented reality products. This loss exceeded analysts' expectations. Overall, Meta's costs rose by 7% to $24.22 billion compared to the same period last year, as the company competes with tech giants like Microsoft and Google in the AI race.
"We've released the first frontier-level open-source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses, and we're driving strong growth across our apps," Zuckerberg added.
Open Source Vision and User Engagement
Zuckerberg has championed open-source technology in AI development, setting Meta apart from competitors like OpenAI and Google. In his open letter titled "Open Source AI is the Path Forward," he outlined his vision for the future.
Meta reported that an average of 3.27 billion people used at least one of its apps, including WhatsApp, Instagram, and Facebook. Ad views for the quarter were up 10% from the previous year, with the average price of ads also increasing by a similar percentage.
"Any apprehensions investors may have had about Meta's spending on AI and the metaverse are likely to be allayed by this quarter's results," said eMarketer principal analyst Max Willens. "Meta's careful introduction of ads on Reels has led to a perfect storm of rising impressions and rising ad prices."
Future Growth Prospects
Willens noted that Meta investors should feel confident about the company's robust investments in its future plans. Reels, Meta's short video-sharing service designed to compete with TikTok, has shown significant growth. Additionally, Meta may begin selling ads on Threads, its text-based platform similar to X, by the end of the year.
Meta's strong performance continues its rebound from 2023, following significant cost-cutting measures and massive layoffs during Zuckerberg's "year of efficiency." The company's global workforce has been reduced to 70,799, down from over 87,000 in 2022.
Zuckerberg has urged investors to be patient as the company advances in AI, acknowledging that launching new products before they are profitable can lead to stock volatility. Nonetheless, Meta's latest earnings report reflects a promising future driven by innovation and strategic investments.
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