As Meta Platforms spends tens of billions of dollars to develop AI, the company’s core apps business is booming. The tech giant reported that its fiscal second quarter net income soared by 73% to $13.47 billion on revenues $39.07 billion, both of which beat analysts’ consensus estimates. Meta’s stock price rose 7% in after-market trading.
Here are the top-line results:
Revenues: $39.07 billion, up 22% from $32 billion in 2023. Analysts from Zack’s Investment Research estimated revenue of $38.34 billion.
Net income: $13.47 billion, an increase of 73% compared to $7.8 the year prior. Meta’s diluted earnings per share of $5.16 beat Zack’s estimate EPS of $4.70.
Daily active users: 3.27 billion on average for June, up 7% year-over-year
Meta is part of Big Tech’s AI arms race and is ramping up investment in generative AI and AI-related product development to keep pace with rivals Alphabet, Microsoft and Apple, along with Microsoft-backed OpenAI.
But Wednesday’s results were rooted in success in Meta’s core advertising and Family of Apps business, which includes Instagram, Facebook, WhatsApp and Threads. Family of Apps reported income from operations of $19.35 billion, up 47% from the year-ago quarter, on revenue of $38.72 billion, which rose 22%.
Founder and CEO Mark Zuckerberg noted that messaging platform WhatsApp now serves more than 100 million monthly active users in the United States and that one-year-old Threads is nearing 200 million monthly active users. He also noted that Facebook is growing among younger adults, which he said “really [goes] against the public narrative around who’s using the app.”
At the same time, Meta reported a 10% year-over-year increase in ad impressions delivered across the company’s family of apps, with the average price per ad also growing 10% compared to 2023.
The results were offset by continued losses in Meta’s Reality Labs business. But Zuckerberg was unbowed, promising to double down on both the metaverse and AI spaces.
“We are in the fortunate position where the strong results that we’re seeing in our core products and business give us the opportunity to make deep investments for the future, and I plan to fully seize that opportunity to build some amazing things that will pay off for our community and our investors for decades to come,” Zuckerberg said during Wednesday’s shareholder call. “The progress we’re making on both the foundational technology and product experiences suggests that we’re on the right track.”
Zuckerberg touted the success of Meta AI, which he said is “on track to be the most used AI assistant in the world by the end of the year.” the positive sales of Ray-Ban Meta AI glasses and the growth of one-year-old Threads, which the company said is nearing 200 million in monthly active users.
Meta said it expects third quarter 2024 revenue to be in the range of $38.5-$41 billion. And Meta expanded its estimated full-year 2024 capital expenditures from $35-40 billion to $37-$40 billion.
“We currently expect significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts,” the company said in its earnings statement.
After a few years in which Zuckerberg has worked to slim down Meta’s workforce, the headcount remained relatively stable this quarter, decreasing by 1% year-over-year.
Meta warned Wednesday that Reality Labs will likely be an ongoing drain on earnings, with mounting losses due to product investment and development. The unit recorded an operating loss of $4.48 billion on revenue of $353 million in the second quarter, a 20% dip from a loss of $3.74 billion on $276 million in revenue the year before.
Meta has booked about $50 billion in cumulative losses from Reality Labs since 2020.
The Meta CEO nevertheless reiterated his message to Wall Street on Wednesday that the company has a track record of making long-term technology bets that pay off years later.
“We have a relatively long business cycle of starting a new product, scaling it to something that reaches a billion people or more, and only then really focusing on monetizing at scale,” Zuckerberg said.
What is still unclear for Meta – and other Big Tech companies – is how long it will take for their AI investments to pay off. “We’re still uncovering the wide range of use cases that it’s valuable for,” Zuckerberg told analysts. “An important part of our vision is that we’re not just creating a single AI, but enabling lots of people to create their own AIs.”
The Meta CEO’s enthusiasm for AI development was palpable on Wednesday. “It’s why there are all the jokes about how all the tech CEOs get on these earnings calls and just talk about AI the whole time,” Zuckerberg said. “It’s because it’s actually super exciting, and it’s going to change all these different things over multiple time horizons.”
