Meta's Q3 Report: Revenue Surpasses Expectations, Ad Impressions Fall Short

Meta's Q3 Performance Overview

The third quarter of the year saw Meta, formerly known as Facebook, report a revenue of $40.59 billion, marking a 19% year-on-year increase and surpassing estimates of $40.25 billion. The company's advertising revenue also rose by 19% year-on-year, reaching $39.89 billion and beating estimates of $39.71 billion. The Family of Apps revenue, which includes Instagram, WhatsApp, and Messenger, also saw a 19% year-on-year increase, standing at $40.32 billion and beating estimates of $39.92 billion. However, Reality Labs, Meta's virtual and augmented reality division, reported revenue of $270 million, a 29% year-on-year increase but falling short of the estimated $312.8 million.

Operating Income and Other Revenue

Meta's operating income rose by 26% year-on-year to $17.35 billion, exceeding estimates of $16.24 billion. The Family of Apps operating income also beat estimates, standing at $21.78 billion, a 25% year-on-year increase. Reality Labs, however, reported an operating loss of $4.43 billion, an 18% year-on-year increase but still better than the estimated loss of $4.66 billion. Other revenue for Meta stood at $434 million, marking a 48% year-on-year increase and surpassing estimates of $395.5 million. The operating margin was 43%, compared to 40% year-on-year, and beating estimates of 39.6%. The earnings per share (EPS) was $6.03, compared to $4.39 year-on-year, and surpassed estimates of $5.25.

Ad Impressions and User Growth

Despite the solid earnings, Meta reported a decline in ad impression growth for the second consecutive quarter. The growth fell from 10% in Q2 to 7%, missing estimates of 10.8%. However, this was somewhat offset by the average price per ad, which rose by 11%, surpassing the estimate of 6.8%. According to Meta, approximately half of the world's population logs onto its platform every day. The average number of daily users across its family of services was 3.29 billion, marking a 4.8% year-on-year increase and beating the estimate of 3.25 billion.

Future Forecasts

Meta's Chief Financial Officer (CFO) provided forecasts for the future. For the fourth quarter, total revenue is expected to be between $45-48 billion, compared to sell-side estimates of $46 billion. Total expenses for the full year of 2024 are expected to be in the range of $96-98 billion, up from the prior range of $96-99 billion. For Reality Labs, the CFO expects 2024 operating losses to increase significantly due to ongoing product development efforts and investments to scale the ecosystem. Capital expenditures for the full year of 2024 are expected to be in the range of $38-40 billion, up from the prior range of $37-40 billion. The fourth quarter tax rate is expected to be in the low teens.

Bottom Line

Despite the generally positive Q3 report, Meta's stock fell slightly after hours. This could be due to the high expectations already set for the company, which recently surged to all-time highs. With such a large concentration of investors already long on the company, it was challenging for Meta to surprise to the upside. What are your thoughts on Meta's Q3 performance? Do you think the company will continue to grow in the future? Feel free to share this article with your friends and discuss it. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.