Meta’s report gives hope that big tech’s huge spending on AI will pay off

Meta✴ published a report according to which its financial performance for the second quarter of 2024 exceeded analysts’ estimates. The company’s revenue, earnings and forecast for the coming quarter were higher than expected.

Image source: Mark Zuckerberg

Meta✴ revenue in the second quarter of 2024 was $39.07 billion versus analysts’ expectations of $38.31 billion, representing 22% year-over-year growth—the fourth consecutive quarter the company has demonstrated revenue growth of more than 20%. The company’s profit was $13.47 billion, or $5.16 per share, while analysts had predicted $4.73 per share – this corresponds to an increase of 73%: in the second quarter of last year, Meta✴ profit was $7.79 billion, or $2.98 per share. According to the company’s own forecast, revenue in the third quarter will be in the range of $38.5 billion to $41 billion (average $39.75) – analysts expected a forecast of around $39.1 billion.

Meta✴’s positive results indicate that it continues to gain market share in the digital advertising market, which constitutes the company’s core business. Advertising revenue, which comes primarily from the Facebook✴ and Instagram✴ platforms, showed year-over-year growth of 22%. Last week, Alphabet reported an 11% increase in Google advertising sales, while YouTube did not meet analysts’ expectations.

Meta✴’s costs in the second quarter amounted to $24.2 billion, which also included the settlement of the Texas case regarding the unauthorized use of data by a facial recognition algorithm, which cost the company $1.4 billion. Capital expenditures for the second quarter amounted to $8.47 billion, which is lower than analysts expected $9.51 billion. Meta✴ maintained its cost forecast for 2024 at $96–99 billion; the capital expenditure forecast of $35 billion was raised to a range of $37-40 billion. The number of Daily Active People (DAP), that is, users who opened at least one of the company’s applications, reached 3.27 billion, which is in line with analysts’ estimates.

Image source: Meta✴

The social media giant continues to implement its cost-cutting program, which it announced at the end of 2022. Several rounds of layoffs eliminated a total of about 21,000 jobs. Operating income grew by 58% year-on-year to $14.9 billion; operating margin increased from 29% to 38% over the same period. Headcount fell 1% year-on-year to 70,799 as of June 30.

At the same time, Meta✴ continues to invest heavily in advanced technologies such as artificial intelligence and virtual reality – they are necessary to build the metaverse. The company is investing in data centers and computing resources to combat competitors. Capital expenditures are expected to increase significantly in 2025 due to investments in research support and product development.

By the end of the year, Meta✴, according to its CEO Mark Zuckerberg, will have 350,000 advanced Nvidia H100 artificial intelligence system accelerators, or 600,000 if we count equipment from other models and manufacturers by analogy. The company recently introduced a major update to its large language models, Llama 3.1 – the most powerful one has 405 billion parameters. Since the beginning of the year, Meta✴ shares have shown growth of 34%; after the publication of the report, they added an additional 6.9%.