Facebook parent Meta reported a return to sales growth after three quarters of declines, sending its shares up 12 per cent and paving the way for it to plough ahead with a big bet on artificial intelligence.
The parent of platforms including Facebook, Instagram and WhatsApp added more than $50bn to its market capitalisation in after-hours trading, following earnings on Wednesday that showed signs of recovery in its advertising business. Revenue in the first three months of 2023 was up 3 per cent from a year ago to $28.6bn, beating analysts’ expectations for a slight decline.
In the current quarter, it has forecast revenue between $29.5bn-$32bn, above expectations for a rise to $29.46bn.
Meta has faced particular investor anxiety as advertiser spending has declined amid chief executive Mark Zuckerberg’s costly bet on the metaverse. The company previously announced a big restructuring including a flattening of the management structure and redundancies of about 20,000 staff, in what Zuckerberg has dubbed the “year of efficiency”.
“When we started this work last year, our business wasn’t performing as well as I wanted,” Zuckerberg said on a call with analysts. “But now we’re increasingly doing this work from a position of strength.”
Meta, like its Big Tech peers, has been racing to gain an edge in the battle to harness AI, which has taken Silicon Valley by storm. On Wednesday Zuckerberg outlined his vision for wielding the technology, as Meta pours investment into deploying AI tools to make its platform more engaging and its advertising more effective, as well as to streamline internal processes.
Since the company launched Reels, its short-form video feed to rival the increasing threat from TikTok, its AI-driven recommendations had boosted time spent on Instagram by 24 per cent, he said.
Amid growing hype around the potential of AI, Zuckerberg said Meta was working on new AI-powered features such as “visual creation tools” for Instagram, and “AI agents” for business messaging.
He also said the company intended to use generative AI — a fast-emerging technology that can be used to produce novel content such as graphics or literature — to help brands create more personalised ads quickly and easily. It comes as Meta has faced challenges in targeting and measuring ad campaigns following privacy changes by Apple.
Overall, Zuckerberg said that developing Meta’s AI infrastructure had been the “main driver” of an increase in capital expenditure over the past few years, but added: “We are no longer behind building out our AI infrastructure, and to the contrary, we now have the capacity to do leading work in this space at scale.”
Despite the focus on AI during the call, Zuckerberg reiterated his commitment to building a digital avatar-filled metaverse, disregarding “the narrative” that the company was moving away from his vision there. “I just want to say upfront, that’s not accurate.”
Meta, along with its Silicon Valley peers, has been pummelled by inflationary pressures and macroeconomic woes over the past year. However, rivals Google and Microsoft showed similar resilience in earnings reports on Tuesday, dispelling fears of a deeper tech slowdown.
Meta slightly adjusted the top end of its guidance for expenses in 2023, from a range of $86bn-$92bn previously, to $86bn-$90bn. Its capital expenditure guidance remained unchanged from the previous quarter — between $30bn-$33bn.
Net income in the first quarter fell 24 per cent to $5.7bn, beating analysts’ estimates. The number of people using at least one of Meta’s apps rose 5 per cent to just over 3bn.
“The year of efficiency is off to a stronger than expected start for Meta,” said Insider Intelligence principal analyst Debra Aho Williamson.
“But Meta can’t afford to sit still in this environment; it must finish rebuilding its ad targeting capabilities after the Apple privacy debacle, make a strong case to advertisers for why they should invest in Reels instead of TikTok, and keep restless creators in the fold.”
Credit: Source link
