Meta shares soared in the US aftermarket following the release of earnings that obliterated analyst estimates, driven by surging advertising spending across its platforms.
Meta’s Q2 revenue came in at $47.5bn, far higher than the $44.8bn expected by analysts. EPS rocketed 38% higher to $7.14.
“Meta has knocked it out of the park. Pick your metric and Meta crushed it, from ad revenue growth to daily users, all the way down to the profit lines,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“AI is clearly delivering real-world benefits for advertisers, and they’re willing to pay more as a result. Average price per ad was up 9% over the quarter, a clear indication that Meta is delivering an improved product for both users and advertisers.”
Meta’s core ‘Daily Active People (DAP)’ metric rose again to 3.46 billion people in the quarter. This is the total number of people who used one of Facebook, Instagram, Messenger, or WhatsApp at least once during the period.
Higher ad costs and a higher number of people looking at those ads mean higher revenues and profits.
Meta made $5 billion more in net income in Q2 than the same period last year.
So no wonder Zuckerberg is reportedly prepared to splash out over $100m on a signing-on bonus to poach a single OpenAI employee as the AI race continues unabated.
Meta’s spending on AI is mind-blowing. Not wanting to fall behind rivals, the firm has upped its guided capex spend to as much as $72bn this year. The recent acquisition of a 49% stake in Scale AI in June demonstrates their intent to ensure they are a major player in the space.
“The broader focus now turns to Meta’s mammoth AI investment plans and whether it can continue to manage those costs without hurting earnings or free cash flow,” Britzman explained.
For now, at least, investors are more than content with surging revenues and profits. Meta shares were 10% higher at the time of writing.