Meta (META), the parent company of Facebook and Instagram, released its third-quarter earnings on Wednesday, exceeding expectations in terms of revenue and ad impressions. However, the initial surge in Meta’s stock price was short-lived as the company issued conservative guidance for the fourth quarter.
Meta’s Q3 earnings report revealed that the company achieved significant milestones. The social media and tech giant reported a robust advertising revenue of $33.64 billion, surpassing the expected figure of $32.94 billion. This positive performance was complemented by a 31% year-over-year increase in ad impressions, outperforming the anticipated 29.6%.
Despite these impressive results, Meta’s stock price experienced a rollercoaster ride in after-hours trading. The shares initially surged by as much as 4%, only to erase those gains after the company’s earnings call. As a result, the stock opened over 3% lower in Thursday’s pre-market trading.
Meta’s Chief Financial Officer, Susan Li, attributed the uncertainty in the ad market to geopolitical unrest, both in the Middle East and on a global scale. She stated that it was challenging to pinpoint the exact cause of the softening ad market, saying, “It’s hard for us to attribute demand softness directly to any specific geopolitical event.” However, Li noted a historical pattern where demand softness often followed previous regional conflicts, such as the Ukraine war. The company, therefore, took these factors into account when providing a more cautious outlook for Q4.
Meta has been navigating the challenges of evolving from a social media platform into an AI-powered advertising powerhouse while expanding its presence in virtual reality (VR) and augmented reality (AR). The company has been focusing on two critical areas of interest for investors: its AI initiatives and its position in the digital advertising market, which has experienced a prolonged downturn and is only beginning to show signs of recovery.
The strong performance of Meta’s stock throughout the year is notable. The shares have surged by more than 130% year-to-date, significantly outpacing both the S&P 500 and the Nasdaq Internet Index, which have seen gains of approximately 9% and 34%, respectively, during the same period.
Neuberger Bergman analyst Daniel Flax commented on Meta’s stock performance, stating, “The stock has done well this year. [If they can] drive durable growth and translate that into earnings per share and free cash flow generation, I think the stock can continue to work its way higher.”
As Meta continues to navigate the evolving landscape of technology and advertising, investors and analysts will be closely monitoring the company’s ability to adapt and maintain its growth trajectory.