Meta Surges on Strong Earnings, AI Ambitions
Tech Giant Exceeds Expectations, Fuels Stock Rally
Meta Platforms has delivered a robust second quarter, significantly surpassing analyst expectations and prompting a substantial rise in its stock value. The Facebook parent company announced impressive revenue and earnings figures, signaling strong performance in its core advertising business and bold investments in artificial intelligence.
Financial Triumphs and Future Outlook
For the second quarter, Meta reported a turnover of $47.5 billion, a notable increase from the $39 billion recorded in the same period last year. Earnings per share reached $7.14, a significant jump from the previous year’s $5.16. These figures comfortably outpaced the anticipated $44.8 billion in revenue and $5.89 per share. The company’s forward-looking guidance also impressed, projecting third-quarter revenues between $47.5 billion and $50.5 billion, exceeding the $46.2 billion previously expected by analysts.
The stock market reacted enthusiastically to the news, with Meta’s share price climbing by up to 10% in after-hours trading. This surge is attributed to the company’s positive financial results and its optimistic outlook, coupled with its aggressive push into artificial intelligence.
Heavy AI Efforts Drive Growth
Meta’s commitment to artificial intelligence is a central theme in its current strategy. CEO **Mark Zuckerberg** announced plans to invest hundreds of billions of dollars in data centers over the coming years to advance AI development towards human-level intelligence. This strategic focus has led to the establishment of Meta Superintelligence Labs, which has recruited approximately 50 AI experts, including prominent figures like **Sengjia Zhao**, a key developer behind OpenAI’s ChatGPT.
The company has also bolstered its infrastructure investments. In June, Meta acquired a 49% stake in AI company Scale AI for $14.3 billion. Some newly hired AI experts are reportedly receiving lucrative compensation packages, with bonuses potentially reaching $300 million over four years.
“The initiative shows how important this is to Meta, but it can put pressure on the bottom line in the short term.”
—Burnt Thill, Analyst at Jefferies
AI Fuels Advertising Revenue
Meta’s primary revenue stream comes from advertising across its platforms, including Facebook, Instagram, Messenger, and WhatsApp. Investment Director at Nordea, **Robert Næs**, commented on the company’s strategic shift.
“Now users get content they didn’t know they wanted, and it contributes to increased advertising revenue.”
—Robert Næs, Investment Director at Nordea
Næs explained that Meta’s substantial AI investments enhance user experience by delivering more accurate and personalized content. This engagement drives increased time spent on the platforms, which in turn boosts advertising revenue. The company has seen a significant increase in user numbers, with an average of 3.48 billion daily active users in the second quarter, reflecting 6% year-over-year growth.
For instance, Meta’s AI-powered recommendation engine for Reels on Instagram has reportedly led to a 24% increase in viewing time for the short-form video feature.
“There has been good growth in the core platforms. But in order for the long-term picture to hold, the figures for the next quarters must also be strong,” Næs concluded.
