On Wednesday, Meta Platforms exceeded revenue and profit projections for the third quarter, driven by continued cost-cutting measures as well as a rebound in online advertisement spending in advance of the holidays.

The proprietor of Facebook and Instagram, two social media platforms that just reported their highest operating margins in the past two years, also reduced spending for the year.

However, as it continued to make investments in AI infrastructure and postponed its staffing needs until the next year, the company predicted that its 2024 spending would surpass Wall Street forecasts. It also hinted that fourth-quarter sales would be negatively impacted by the situation between Israel and Gaza.

Meta's stock, which has increased by around 150% so far this year, fluctuated throughout after-hours trading, first rising 3% and then falling 3% to trade two hours later below the closing price.

With pressure from competitors and a post-pandemic dip in digital ads, Meta, which also operates WhatsApp, has been recovering from a brutal 2022 when investors left as the business spent billions developing the metaverse, the shared virtual world environments that anyone can access through the internet.

Since the autumn of 2022, it has laid off 21,000 workers, mostly in non-engineering positions. Executives stated that the company is planning to ramp up hiring again the following year, with a particular focus on engineering talents.

CEO of Meta Mark Zuckerberg, who said in February that 2023 was going to be the company's "year of efficiency," informed analysts during a conference call that the company's top investment focus for 2024 will be artificial intelligence. He said that the corporation will not be hiring too many people and that it will de-prioritize other non-AI initiatives, but he did not explain too much.

According to Zuckerberg, Meta was able to see through its long-term objectives in a highly volatile world because of its lean company culture.

CFO Susan Li said that Meta intended to have a meaningfully larger workforce by the end of 2024 than its around 66,000 employees as of the end of September.

In the third quarter, Meta's operating margin increased to 40%, doubling. Additionally, revenue increased at its fastest rate in two years.

Expenses for 2023 were reduced from a range of 88 to 91 billion dollars to between 87 and 89 billion dollars.

Based on LSEG statistics, the social media business said that its projected 2024 total expenses will be between 94 and 99 billion dollars, which is more than its initial predictions.

Citing the same increased AI spending on infrastructure, employment plans, and anticipated losses on its metaverse-focused Reality Labs unit as in the quarter prior, it did not offer any new justifications for the expenditures.

After lagging behind in the adoption of AI-friendly software and hardware, the firm has been rushing to modernize its data centers. According to the report, capital spending in 2024 is expected to be between 30 and 35 billion dollars, with investments driving up the amount.

Resilient Advertising

Heading into the holiday shopping season, advertisers who were confident about strong consumer spending rushed to the social network company's digital platforms; this comeback helped drive up ad sales at Alphabet and Snap.

Meta's ads watched in the third quarter, which concluded on September 30, rose by 31% compared to the same period last year. The average price of each ad fell by 6%, but it was the slowest decline in seven quarters.

In accordance with expert projections, the company estimated sales for the fourth quarter to range between 36.5 and 40 billion dollars.

Nonetheless, Meta noted "softness" in ad expenditure at the start of the fourth quarter, which seemed connected to Israel and Hamas's war. Li claimed that the company's outlook for the fourth quarter considered the impact.

Meta cautioned once more about impending regulatory challenges, mentioning in particular a move by the US privacy agency to strengthen a 2019 order that forbids profiting from the data of minors.

For the quarter that ended in September, revenue increased by 23% to $34.15 billion. LSEG data shows that analysts had projected revenue of $33.56 billion.

The daily active population (DAP) of Meta increased by 7%. The measure is used by the business to monitor individual users who have used any of its applications, including Instagram, Messenger, Facebook, and WhatsApp, within a given day. In the June quarter that had just ended, DAP had also increased by 7%.

Facebook's daily active user base increased by 5%, while impressions of ads across all of Meta's applications increased by 31%.