After a challenging 2022, Meta, formerly known as Facebook, has made a significant comeback, showcasing its strongest sales and profits in its history for the third quarter. The company's recent earnings report has not only impressed Wall Street but also highlighted the resilience and adaptability of Mark Zuckerberg's social media empire.
Meta reported a revenue of $34.1 billion, surpassing the expected $33.6 billion. The earnings per share stood at $4.39, outperforming the anticipated $3.64. These figures marked the third quarter as Meta's most profitable one ever, also recording its highest quarterly gross revenue. Following the release of these results, Meta's shares saw an approximate 4% rise, compensating for the 4% loss experienced during regular trading hours after Alphabet's earnings did not meet expectations.
The primary driver behind Meta's impressive top line is the resurgence of advertisers' spending. The company, which derives over 95% of its revenue from advertising, witnessed a 24% year-over-year increase in ad sales. This uptick can be attributed to advertisers' renewed confidence and willingness to invest in the platform.
However, it's not just the revenue that's noteworthy. Meta's strategic cost-cutting measures have played a pivotal role in its enhanced profitability. As part of Zuckerberg's "year of efficiency," the company reduced its expenses by 8% year-over-year. This initiative was marked by significant layoffs, with over 20,000 employees being let go. Despite these measures, Meta reported a loss of $3.7 billion in Zuckerberg's ambitious metaverse division. Since its inception in 2021, this augmented and virtual reality unit has accumulated losses exceeding $35 billion.
Yet, challenges persist. Recently, 33 states took legal action against Meta, alleging that the company misled Americans about the potential harm its platforms, namely Facebook and Instagram, could inflict on the mental health of young users. This lawsuit underscores the ongoing scrutiny and challenges tech giants face concerning user welfare and ethical considerations.
Despite the hurdles, Meta's stock performance in 2023 has been commendable. The stock has surged by 140%, making it the second-best performing stock on the S&P 500. This rebound is particularly significant given the company's 60% stock drop in 2021. Last year's decline was primarily due to skepticism surrounding Zuckerberg's vision of pivoting from traditional social media to the metaverse. The company's rebranding from Facebook to Meta in October 2021 further accentuated these doubts. However, a series of strong earnings reports this year has reinstated Wall Street's confidence in the company's direction and potential.
Meta's Q3 earnings report paints a picture of a company that has not only weathered a storm but has come out stronger. Through strategic decisions, adaptability, and a clear vision, Meta has showcased its ability to evolve and thrive in a rapidly changing digital landscape.
