Revenue surged by 27% from $28.65 billion in the corresponding period a year prior, marking the most rapid expansion seen in any quarter since 2021. Net profit more than doubled to $12.37 billion, or $4.71 per share, from $5.71 billion, or $2.20 per share, in the previous year.
One factor contributing to the spike in net earnings is that, despite the acceleration in revenue growth, expenses on sales and marketing plummeted by 16% compared to the same period last year.
Meta projected second-quarter sales to range between $36.5 billion and $39 billion. The midpoint of this range, $37.75 billion, would reflect an 18% year-over-year growth but falls below analysts’ average estimate of $38.3 billion.
The decline in stock value accelerated early in the earnings call when CEO Mark Zuckerberg delved into discussions about investments, particularly in areas such as eyewear and mixed reality, where the company is not currently generating revenue. He also mentioned an increase in investments in artificial intelligence.
“Positively, once our new AI services achieve scale, we have a solid history of effectively monetizing them,” Zuckerberg stated.
The parent company of Facebook no longer discloses daily or monthly active users but instead provides a figure for what it terms “family daily active people,” which stood at 3.24 billion for March 2024, marking a 7% increase from the previous year.
Meta has heightened investor expectations due to its improved financial performance in recent quarters, leaving little margin for error. The stock has surged by approximately 40% this year, as of Wednesday’s closing, following nearly tripling in value last year. In February 2023, Zuckerberg informed investors that it would be the “year of efficiency,” which triggered the rally.
During that period, Zuckerberg highlighted the company's efforts to streamline operations by eliminating unnecessary projects and addressing bloat, aiming to transform Meta into a “stronger and more agile organization.” The company shed around 21,000 jobs in the first half of 2023, and Zuckerberg stated in February of this year that hiring would be “relatively minimal” compared to historical levels.
Headcount dropped by 10% in the first quarter compared to the previous year, totaling 69,329.
Meta anticipates capital expenditures for 2024 to range between $35 billion and $40 billion, up from a previous forecast of $30 billion to $37 billion, “as we continue to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap,” Meta stated.
The company reported an average revenue per user of $11.20 for the quarter.
Meta has been regaining market share in digital advertising following a challenging 2022, during which it faced repercussions from Apple’s iOS privacy update and macroeconomic concerns that led many brands to curtail spending.
Zuckerberg spearheaded an effort to rebuild the advertising business with a focus on AI. During the last earnings call in February, Meta’s finance chief, Susan Li, mentioned investments in AI models capable of accurately predicting relevant ads for users, as well as tools to automate the ad creation process.
Advertising revenue, which comprises the majority of Meta’s business, surged by 27% in the first quarter to $35.64 billion.
Meta has benefited from a stabilizing economy and increased spending from Chinese discount retailers such as Temu and Shein, which have been allocating funds to Facebook and Instagram to reach a broader audience. Some analysts have cautioned that reduced spending from advertisers based in China could pose a concern in the first quarter and beyond.
Li stated during Wednesday’s earnings call that the company is not quantifying the contribution from China in the quarter, but she noted that advertising revenue in the Asia-Pacific region surged by 41% from the previous year, making it the fastest-growing region, driven by online commerce and gaming.
The company’s Reality Labs unit, responsible for its hardware and software for developing the nascent metaverse, continues to incur losses. Reality Labs reported sales of $440 million for the quarter and incurred losses of $3.85 billion, bringing total losses since the end of 2020 to over $45 billion. Analysts had anticipated the division to report an operating loss of $4.31 billion for the quarter.
