Meta beat profit forecasts, but missed out on user growth

The technology giant Meta (formerly Facebook) recently released its financial results for the third quarter of 2024. Meta reported revenue of $40.59 billion, beating analysts’ forecasts of $40.25 billion. In the line of earnings per share, the company reported $6.03 per share, above the early expectation of $5.20 per share.

On the other hand, Meta reports that the number of its daily active users increased by 5% compared to the corresponding quarter and stood at 3.29 billion, lower than the expectations of the analysts who expected 3.31 billion daily users.

At the same time, the company published its spending forecast for 2024, which is expected to be in the range of 96-98 billion dollars, lower than the company’s previous forecast of 96-99 billion dollars.

Now after the publication of the reports, the stock reacts with a 2.5% drop in late trading.

Like the other technology giants, Meta is also in the artificial intelligence race. The company develops improved models and ranks among the companies that promote the developing technology. Beyond the launch of the newest models, Wall Street investors are waiting to see if you will be able to translate the developments into profits.

In the last year, the stock has risen by about 90% and there is no doubt that the market is satisfied with Meta’s involvement in the field of artificial intelligence and is using it to improve its core business, including the advertising business.

The market is afraid of volatility in the stock

In the previous quarter, the company reported that it was generating profits from the artificial intelligence developments that encouraged users to be more involved in the social network. Looking ahead, Wall Street analysts estimate that the company’s advertising revenues will continue to rise. Bank of America’s analysts estimate that positive potential in the reports can come from, among other things, an increase in revenues thanks to growth in AI and expectations for cost reductions in the next quarter, and negative potential – among other things, from a disappointing forecast for the next quarter and expectations for an increase in CAPEX next year.

At the same time, the bank warns against the high expectations from Meta, and according to them, “further updates regarding the strength of AI are expected, but the high expectations, and the potential for conservatism (in the forecast) for the fourth quarter – adds volatility risk to the stock in the near term.”

The Metaverse Division, however, still continues to lose. The company continues to explain that the weakness in the division stems from a future technology that the company is building that is not yet ready for commercialization. Looking ahead, the losses are expected to increase from year to year, and at some point – Zuckerberg hopes that he will be able to combine artificial intelligence with Metaverse as soon as possible.

Similar to the previous quarter, the company will have to deal with questions about the elections in the United States, and how it plans to take control of the discourse that will rage on social networks in the coming days.