Meta Platforms posted its first sales increase in nearly a year on Wednesday and forecast second-quarter revenue above market expectations, as digital advertisers returned to familiar platforms like Facebook and Instagram amid growing economic worries.
Shares of the Facebook parent soared by 12 percent after the bell, adding more than $50bn to its stock market value with the profit also beating Wall Street estimates.
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The company said its expenses for the year may be lower than it forecasted in March.
The strong results came as Meta’s tech rivals likewise appeared to be climbing out from an industry-wide slump that has prompted more than 150,000 layoffs across the sector.
Google parent Alphabet reported results on Tuesday as its digital advertisement sales held up better than expected and demand rose for cloud services. Microsoft beat Wall Street’s estimates and said artificial intelligence products were stimulating sales.
Meta has kicked off an aggressive cost-cut drive, with plans to eliminate 21,000 jobs and flatten its middle-management structure as it works towards CEO Mark Zuckerberg’s goal of turning 2023 into the “year of efficiency”.
The results indicate the austerity drive was “off to a stronger than expected start for Meta,” Debra Aho Williamson, principal analyst at Insider Intelligence, said.
“In this economic environment – and after the disaster that was 2022 – 3 percent year-over-year revenue growth is an accomplishment. Meta’s strong guidance for Q2 revenue is another indicator that the company may be starting to come out of the woods.”
The social media giant faced a bruising 2022 as a pandemic-era e-commerce boom sputtered, while rivals like TikTok captured young users, while Apple’s privacy updates cut access to the user data around which it built its advertising business.
As it cuts costs, Meta is simultaneously carrying out several expensive overhauls to bolster its core business, including a large project to upgrade AI capacity, while also investing $10bn a year in a longer-term bet on “metaverse” hardware and software.
“Our AI work is driving good results across our apps and business. We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision,” Zuckerberg said.
Spending on the AI retooling has spiked the company’s capital expenditures, which came in slightly under expectations at $7.1bn for the quarter. Analysts forecasted $7.2bn in capital expenditures in the quarter, based on the company’s annual forecast of $30bn to $33bn, which it kept unchanged.
The company narrowed its annual expenses forecast to between $86bn and $90bn, down from the $86bn to $92bn it predicted in March when it announced its second round of layoffs.
Meta said its quarterly price per advertisement decreased by 17 percent from a year earlier, while it expects current-quarter revenue between $29.5bn and $32bn, compared with analysts’ estimates of $29.53bn, according to Refinitiv data.
Net profit for the first three months of the year fell to $2.20 per share from $2.72 a year earlier but beat expectations of $2.03 a share.
Revenue for the first quarter rose 3 percent to $28.65bn, beating an average estimate of $27.66bn.
“We continue to expect Reality Labs operating losses to increase year-over-year in 2023,” Meta said in a statement, referring to its metaverse-oriented unit into which the company had been investing billions of dollars and that lost $13.7bn last year.