Meta Q3 2023 Earnings Update:Excellent Earnings Results in Poor Market Response
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Meta Platforms, Inc.'s Q3 earnings report shows strong performance, exceeding revenue and EPS estimates.
The success is attributed to the growth of the digital advertising market along with the growth of its core products.
However, risks include potential loss of momentum, rising costs of the metaverse project, and limited upside in the short term.
After the earnings report was released, Meta initially rose 5.5% in after-hours trading, but the stock price suddenly turned downward after the earnings conference. The earnings report showed that Meta's revenue was $34.15 billion, a year-on-year increase of 23%, higher than the expected $33.56 billion. Earnings per share were $4.39, much higher than the expected $3.63. The strong revenue growth represents a rebound in company performance and advertising industry recovery, and the good news is that Meta's recovery is faster than its competitors. Google's revenue grew by only 11%, while Snapchat's grew by 5%.
Investors were also pleased to see that daily active users exceeded expectations at 2.09 billion, higher than the expected 2.07 billion, while monthly active users were in line with expectations at 3.05 billion. Average revenue per user was $11.23, higher than the expected $11.05.
The operating profit margin was also very impressive, reaching 40% again this quarter, significantly higher than last quarter's 29%, and a high since the second quarter of 2021. This is the best answer to Zuckerberg's "year of efficiency". As shown in the graph, each cost category for Meta has decreased to some extent, not only decreasing by 7% year-on-year but also lower than two years ago. The company stated that it had completed the previous staff reduction plan by the end of September, reducing personnel by 24% year-on-year, and is continuing to integrate other facilities and restructure data centers.
Investments in AI have also yielded significant returns. The company noted that AI helped improve advertising efficiency, especially by bypassing Apple's privacy protection, which also increased revenue. This increase and decrease in revenue contributed to the high profit margin.
In terms of guidance, the company expects Q4 revenue to be between $36.5 billion and $40 billion, with the midpoint of the range being $38.25 billion, an increase of 19% year-on-year, slightly lower than analysts' expected $38.85 billion. The full-year 2023 cost outlook has been lowered from the previous range of $88-91 billion to $87-89 billion. The full-year 2024 cost is expected to be between $94-99 billion, mainly due to infrastructure restructuring, salaries, and investment in the metaverse.
However, during the Q&A session of the earnings conference, the management revealed that there was uncertainty about the guidance for the next quarter. They said they noticed that demand was weakening since entering the fourth quarter, which they believed might be due to the war, but they were not sure of the real reason. In earlier responses, the management also mentioned that revenue in Israel was affected. Although later, the management emphasized that the company's fundamentals were very good, the stock price began to fall from here.
From the earnings report itself, Meta's earnings report is a real cost-cutting effort and efficiency improvement, and it significantly beat expectations, especially in terms of earnings per share. Net profit increased by 164%. The high revenue growth of the company also benefited from the growth of the entire advertising market. According to Statista's data, the global advertising market did not decline in 2023, maintaining a growth rate of 10%, and will grow by 9% next year. If the macro environment does not deteriorate further, then the company's performance will undoubtedly continue to improve in the future.
However, the management's comments during the earnings conference have brought some uncertainty to the company's future performance, which has also scared the market to some extent. In addition, the waning enthusiasm for AI and high interest rates are also two major risks that the company faces in the short term. The company also stated that investment in the metaverse would continue to increase. These factors may put some pressure on the stock price in the future and need to be considered.
Google's and Meta's earnings reports have both certified the strong economy and advertising in the United States. From the perspective of performance itself, Meta's Q3 report has fewer flaws than Google's, but the results have not brought much positive impact on the stock price, and even followed the Nasdaq index in a correction.Essentially, it is because in the current tight liquidity environment, the market may have more fear of heights when it comes to technology stocks that have not experienced much pullback. Therefore, even if there are only minor flaws, can easily be blamed for the current sentiment.
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102125877 : But the price drop like shit.
Carter WestOP 102125877: Exactly. Management needs to be more on the ball with their tone and disclosures (if they don’t equate to anything materially bad in total) in this environment.
102125877 : Tats y they must think carefully before saying anything during conference call. Investors very sensitive about the data they absorb.
SpyderCall : I always say that that markets reaction to earnings, regardless of whether the earnings are good or bad, will give you an idea of market sentiment.
Carter WestOP SpyderCall: Judging from the market responses to Microsoft, Google, and Meta, the market punishes flaws quite harshly. Need to be very cautious this earning season.
102125877 Carter WestOP: Exactly