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Meta (NASDAQ: META) posted second-quarter earnings and revenue that surpassed analysts' predictions, owing to a recovery in the digital advertising market. The forecast for the upcoming quarter was also better than anticipated, driving the company's stock up by about 7% in pre-market trading on July 27th.
Here's a breakdown of the Q2 results of Meta stock
- Earnings per share: $2.98, exceeding the Refinitiv forecast of $2.91.
- Revenue: $32 billion, beating the Refinitiv prediction of $31.12 billion.
Several other key figures in the report captured Wall Street's attention:
- Daily Active Users (DAUs): 2.06 billion, slightly above estimates of 2.04 billion.
- Monthly Active Users (MAUs): 3.03 billion, surpassing the 3 billion expectation set by StreetAccount.
- Average Revenue per User (ARPU): $10.63, higher than the $10.22 forecast by StreetAccount.
The 11% year-over-year increase in revenue marked the first double-digit growth reported by the company since the end of 2021. Prior to this quarter, Meta had experienced three consecutive periods of revenue decline due to a sluggish economy and Apple's (NASDAQ: AAPL) privacy changes that affected ad targeting.
The Facebook parent company expects third-quarter revenues to be in the range of $32 billion to $34.5 billion, which indicates at least a 15% growth from a year ago. This surpasses the anticipated guidance of $31.3 billion, according to Refinitiv.
Meta's promising future in the advertising market and improved profitability due to large-scale layoffs have attracted investors in 2023. The stock has surged 159% this year, significantly outpacing the 19% advance in the S&P 500.
In a statement, Meta CEO Mark Zuckerberg said, "We had a good quarter. We continue to see strong engagement across our apps, and we have the most exciting roadmap I've seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall."
Lower expenses boost earnings for Meta stock
Meta reported a net income of $7.79 billion, or $2.98 per share, in Q2, up from $6.69 billion, or $2.46 per share, in the year-ago period.
The second quarter's total costs and expenses stood at $22.61 billion, marking a 10% increase year-over-year. The cost-saving plan implemented by Zuckerberg, which resulted in approximately 21,000 job cuts, seems effective.
Meta has also revised its capital expenditure estimate for 2023 down to between $27 billion and $30 billion from an initial projection of $30 billion to $33 billion. This change is attributed to cost savings and project delays, not a reduction in overall investment plans.
Despite a 14% decrease in total headcount to 71,469, Meta plans to increase payroll expenses as the company transitions towards "higher-cost technical roles."
The company's Reality Labs unit, responsible for developing the metaverse, recorded $276 million in sales for the second quarter while incurring a loss of $3.7 billion. Meta also anticipates that the unit's losses will continue to rise due to ongoing product development efforts in augmented reality/virtual reality and investments to expand the ecosystem further.
What next for META stock price and valuation?
Meta has been among the top-performing tech stocks in 2023. It has already surged 150% year-to-date, commanding a market cap of $800 billion. Priced at 29.5x forward earnings, Meta stock continues to trade at a reasonable valuation, given earnings are forecast to rise by 19% annually in the next five years.
Related: Snap Stock Plunges Post Q2 Results