- Meta reported a Q2 revenue increase of 22% to $39.1 billion, surpassing analysts’ expectations of $38.3 billion.
- The company attributed its success to AI enhancements in ad targeting and delivery, suggesting robust digital advertising on its platforms can cover the costs of its AI investments.
OUR TAKE
Meta’s robust Q2 results and optimistic forecast demonstrate the success of its AI investments, reassuring investors about its growth trajectory amidst rising costs. Strong global ad demand and effective AI integration into ad systems highlight Meta’s ability to sustain profitability and user engagement.
–Vicky Wu, BTW reporter
What happened
Meta exceeded market expectations for second-quarter revenue and offered an optimistic sales forecast for the third quarter, indicating that robust digital-ad spending on its social media platforms can offset the costs of its AI investments. Shares of the company rose by 6.8% in after-hours trading following the announcement.
Meta, the parent company of Facebook and Instagram, projected third-quarter revenue between $38.5 billion and $41 billion, with the midpoint exceeding analysts’ estimates of $39.1billion, according to LSEG data. For the April to June period, the company reported a revenue increase of 22% to $39.1 billion, surpassing analysts’ expectations of $38.3 billion.
Meta CFO Susan Li stated on a call with analysts that the company continued to experience strong global advertising demand. She attributed this success to a multiyear project aimed at using artificial intelligence to improve targeting, ranking, and delivery systems for digital ads on its platforms. Both Li and Chief Executive Mark Zuckerberg noted that these AI tools would drive growth over the next two years, while newer generative AI features, such as chat assistants, would take longer to monetise.
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Why it’s important
Meta’s strong financial performance and optimistic forecast signal that the company’s investment in AI is paying off. The robust digital-ad spending on its social media platforms suggests that advertisers are finding value in Meta’s offerings, even as the company continues to invest in developing new AI capabilities. This is particularly significant given the challenges faced by other tech giants in realising returns from their AI investments.
The positive results should reassure investors about Meta’s ability to sustain its growth trajectory despite increasing costs associated with AI and metaverse developments. Meta’s healthy margins and the rise in operating margin, from 29% to 38%, despite a 7% rise in costs for the second quarter, indicate that the company is effectively managing its investments.
Additionally, the increase in family daily active people (DAP), a metric tracking unique daily users of any Meta app, by 7% year-over-year to an average of $3.27 billion for June, demonstrates Meta’s ongoing user engagement and relevance in the digital space.
