Monday, July 22, 2024

Mark Zuckerberg, Meta’s chief executive, spent the past two years navigating a decline in digital advertising and implementing cost-cutting measures. He declared this year as a “year of efficiency” for the company.

The results of these efforts are now starting to show. Meta, the parent company of Facebook, Instagram, WhatsApp, and Messenger, announced on Wednesday that its revenue increased by 23 percent to $34.15 billion in the third quarter. This exceeded Wall Street’s estimate of $33.6 billion from FactSet. Profit for the quarter was $11.6 billion, more than double the previous year’s $4.4 billion.

Meta’s growth was fueled by a rebound in digital advertising, which has also benefited other companies. Google reported increased ad sales, and Snap disclosed rising sales after experiencing a decline for two quarters.

In addition to the recovery in ad revenue, Meta’s results were supported by cost-cutting measures that reduced expenses by 7 percent compared to the previous year, amounting to $20.4 billion.

These results highlight Meta’s resilience during a challenging period for Silicon Valley. The company experienced record profit and user growth during the early stages of the pandemic when people relied more on digital devices and apps. However, as the pandemic situation improved, along with higher interest rates and economic uncertainty, Meta faced difficulties. The company underwent significant restructuring, reducing its workforce by approximately one-third and streamlining its organizational structure.

Jesse Cohen, senior analyst at Investing.com, commented, “The company may be starting to come out of the woods as the Mark Zuckerberg-led company continues to focus on improving operating efficiency.”

Meta’s user growth remained strong in key markets, including the United States and Canada. Over 3.14 billion people use at least one of Meta’s apps daily, representing a 7 percent increase compared to the previous year. Nearly four billion people, approximately half of the world’s population, use one or more of Meta’s apps each month.

Meta’s Twitter competitor, Threads, has also been performing well with nearly 100 million users. Mark Zuckerberg expressed his intention to continue adding features to the app to maintain user engagement.

For the current quarter, Meta expects revenue to be between $36.5 billion and $40 billion. The company also revised its expense forecast for next year, projecting expenses to be between $87 billion and $89 billion, down from the previous guidance of $88 billion to $91 billion. Meta anticipates that its losses from its Reality Labs division, which focuses on metaverse-related products, will continue to increase next year.

However, Meta is cautious about its spending due to a “volatile environment,” including the conflict in the Middle East. Susan Li, Meta’s chief financial officer, mentioned a temporary “softening” in advertising spending in certain areas at the beginning of the conflict, drawing parallels to the situation when Russia invaded Ukraine last year.

Despite the risks, Mark Zuckerberg continues to invest in the metaverse, envisioning it as the next generation of digital connection. This involves significant expenditures on hardware devices such as virtual reality goggles and augmented reality glasses, as well as multimillion-dollar investments in gaming companies that create content for these devices.

These investments have outpaced their income, with no guarantee of mass adoption of the metaverse. Nevertheless, Mark Zuckerberg remains committed to the long-term success of the metaverse initiative.

In recent times, Meta has heavily focused on artificial intelligence (A.I.) as the technology gains attention throughout Silicon Valley and among tech giants like Google and Microsoft. Meta introduced a range of A.I.-powered chatbots in September, offering entertaining or informative distractions.

During the earnings call, Mark Zuckerberg mentioned plans to hire more A.I.-focused technologists. He acknowledged that chatbots are still in their early stages and will improve over time as the company addresses initial glitches and errors.

“It’s going to take time to refine all of these experiences before hundreds of millions or billions of people start using them,” he said.

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