Meta Platforms Surges Ahead with Strong Earnings and AI Integration

Zacks Blog Highlights Recent Stock Performance and Insights

Chicago, IL – November 1, 2024 – Zacks.com has released its latest features from the Analyst Blog. Each day, Zacks Equity Research analysts provide insights on significant news affecting stocks and financial markets. Recently discussed stocks include Meta Platforms (META), Apple (AAPL), Alphabet (GOOGL), and Amazon (AMZN).

Meta’s Impressive Q3 Earnings: A Look at the Numbers

Meta Platforms reported earnings of $6.03 per share for the third quarter of 2024, surpassing the Zacks Consensus Estimate by 16.18%. This figure reflects a significant 37.4% increase from the same period last year.

Over the last four quarters, META consistently beat the Zacks Consensus Estimate, with an average surprise of 11.34%.

Explore the latest EPS estimates and surprises on Zacks Earnings Calendar.

The company’s revenue totaled $40.589 billion, surpassing expectations by 0.95% and rising 18.9% year over year. When accounting for constant currency (cc), revenues increased by an impressive 23% year over year.

Despite the earnings beat, META shares dipped over 3% in after-hours trading. However, shares have increased by 67.2% year to date (YTD), greatly outperforming the Zacks Computer & Technology sector’s gain of 27.6%.

In comparison to its “Magnificent 7” peers, which include Apple, Alphabet, Amazon, Microsoft, and Tesla, only NVIDIA has surpassed META’s performance in the same timeframe.

Here are returns from those peers: Apple at 19.5%, Alphabet at 24.9%, Amazon at 26.9%, Microsoft at 15.1%, and Tesla at 3.7%. NVIDIA led with an impressive YTD appreciation of 181.4%.

The emphasis on AI technology is expected to further boost Meta’s revenue growth, especially following their strong Q3 earnings.

Top-Line Growth Driven by Facebook and Instagram

Revenue growth was notable across regions, with the United States & Canada up 15.9%, Asia-Pacific up 18.6%, Europe up 22.1%, and the Rest of the World (RoW) up 23.9% year over year.

The Family of Apps, which includes Facebook, Instagram, Messenger, and WhatsApp, contributed immensely, bringing in $40.32 billion, an increase of 18.8% from the previous year.

Daily Active People within the Family of Apps rose to 3.29 billion, marking a 4.8% increase year over year. Improved AI-driven features have enhanced user engagement, with time spent on Facebook seeing a 10% rise.

Instagram Reels also thrived, with original posts fueling over 60% of recommendations in the U.S. during the reporting quarter.

Generative AI Fueling Advertising Success

Advertising revenues, which represent 98.9% of Family of Apps revenues, increased by 18.6% year over year, reaching $39.89 billion. At constant currency, this reflects a 23% rise.

Notably, ad revenue growth varied regionally: the United States & Canada saw a 16.3% increase, Asia-Pacific 17.9%, Europe 21.2%, and RoW saw a 23% jump year over year.

The company delivered 7% more ad impressions across its Family of Apps, while the average price per ad rose by 11% during the quarter. META’s adoption of generative AI tools has played a key role in retaining advertiser interest.

Revenues from other services within Family of Apps surged 48.1% to $434 million, largely due to growth in business messaging from WhatsApp Business.

Meta’s Cost Management Strengthens Margins

In Q3 2024, total costs and expenses rose 13.9% year over year, totaling $23.24 billion, lowering the expense percentage to 57.3% from 59.7% in the prior year.

Family of Apps expenses constituted 80% of Meta’s total costs, amounting to $18.5 billion, primarily driven by infrastructure and staffing increases.

Reality Labs reported expenses of $4.8 billion, marking a 21% rise year over year. However, marketing and administrative expenses both decreased significantly.

With a workforce of 72,404, up 9% from last year, Meta Platforms showed strong operational growth, achieving an operating income of $17.35 billion, a 26.2% rise from the previous year. Operating margin improved to 42.7%, up from 40.3% the year prior.

Strong Financial Position and Outlook from Meta

As of September 30, 2024, Meta’s cash and cash equivalents alongside marketable securities amounted to $70.90 billion, a rise from $58.08 billion as of June 30, 2024.

However, long-term debt increased to $28.82 billion from $18.39 billion during the same period. Capital expenditures in Q3 were $9.2 billion, down from $19.37 billion previously, while free cash flow improved substantially to $15.52 billion.

In the third quarter, the company repurchased $8.86 billion of its Class A common stock and allocated $1.26 billion in dividends.

Positive Outlook from Meta Platforms

For upcoming quarters, Meta Platforms anticipates total revenues between $45 billion…