Meta's Strong Q3 Earnings

Meta surpassed Wall Street’s expectations for revenue and profit and provided an upbeat forecast for the current period, signaling that its investments in artificial intelligence are enhancing its ability to sell more targeted advertisements.

The company posted a record $40.59 billion in sales, an all-time high that just beaten Wall Street expectations. The top line jumped 19% compared to the year-ago period.

The social media giant posted a massive profit of $15.7 billion, +19% from the year-ago quarter, surpassing analysts’ estimates.

Net income? That one jumped 35% year-over-year to a record $15.7 billion.

Free cash flows? Also, at a record high of $16.5 billion.

Source: Koyfin

However, Meta also ramped up expected costs as it seeks to grab a further share of the AI market.

The company is investing heavily in building data center infrastructure (consisting of Nvidia’s latest and greatest GPUs, H100) to power infrastructure on which its large language model, „Llama”, runs to capitalize on the generative AI boom.

For user metrics, Meta announced it had 3.29 billion daily active users (DAP) for the quarter.

To put this gigantic number into context, that’s 40% of the global population using the services of META.

The company is raising its capital expenditure (CAPEX) figure for this year to $38-40B (previously $37-$40B).

Meta expects Q4 revenue to be between $45 billion and $48 billion.

The big tech juggernaut expects “significant” growth in CAPEX in 2025.

“Our AI investments continue to require serious infrastructure, and I expect to continue investing significantly there, too,” CEO Mark Zuckerberg said on an earnings call with analysts.

That’s driving the tremendous revenue growth.

Advertising contributed 96% of Meta’s third-quarter turnover.

AI tools can show people more content that matches their interests and is likely to continue to grab online advertisement share.

Despite the mentions of AI and the Ray-Ban AI smart glasses, investors weren’t very excited, and Meta’s stock is slightly down post earnings report.

The big issue here is the conversion of big dollars spent on AI CAPEX into Company profits.

Something that may take a while to come to fruition.

Like other tech giants, Meta has also been investing significantly in data center infrastructure and computing resources, which CEO Mark Zuckerberg believes are essential to maintaining a competitive edge.

Meta shares were up 65% year-to-date, while Nasdaq is only up 22% over the same period, outperforming the other Mag 7 members, except for Nvidia, so far in 2024.

Investors can long Meta using our 2x Facebook, 3x Facebook.

Alternatively, traders can short Meta using our -3x Facebook.

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