meta turned in a healthy 11% uptick in revenue for the second quarter of 2023, topping Wall Street expectations and signaling the social giant’s ad business is recovering after last year’s doldrums.
The parent company of Facebook and Instagram posted revenue of $32.0 billion and net profit of $7.79 billion ($2.98 per share), up 16%. On average, analysts expected revenue of $31.12 billion and earnings per share of $2.91, according to Refinitiv data.
“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,” meta CEO Mark Zuckerberg said in announcing the results.
meta’s Q3 revenue guidance also was higher than Wall Street forecasts. The company expects third quarter 2023 revenue to be $32 billion-$34.5 billion (which assumes a foreign currency “tailwind” of 3% to year-over-year total revenue growth in the third quarter).
The Facebook app’s average daily active user count for June was 2.06 billion, up slightly compared with 2.04 billion three months earlier and 1.97 billion a year ago. Total DAUs across meta’s “family of apps” (Facebook, Instagram, WhatsApp, Messenger) in June reached 3.07 billion, versus 3.02 billion on average for March 2023.
On the earnings call Zuckerberg said that Reels — meta’s TikTok-style video feature — is generating more than 200 billion daily views on Facebook and Instagram. In addition, he said Reels revenue is now on a $10 billion annual run rate, up from $3 billion last fall.
Like other tech companies, meta has taken cost-cutting steps including laying off 11,000 workers last fall and cutting another 10,000 jobs this year. meta’s headcount was 71,469 as of June 30, down 14% year-over-year (and a 7% decline from Q1). about half of the employees affected by the 2023 layoffs are included in the reported headcount as of June 30, the company said.
Meanwhile, the financial performance of meta’s Reality Labs segment — which houses its VR, AR and mixed reality businesses — got even worse in Q2. Revenue dropped 39% to $276 million, while operating loss ballooned to $3.74 billion (up from an operating loss of $2.81 billion a year prior). In 2024, “for Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and investments to further scale our ecosystem,” meta said in its quarterly report.
On regulatory matters, meta commented that it saw a “positive development” with the European Commission’s adoption of a final adequacy decision, which “allows us to continue to provide our services in Europe.” That said, the company said it still sees “increasing legal and regulatory headwinds in the EU and the U.S. that could significantly impact our business and our financial results.”
meta’s Q2 results come after the company launched a rival to Twitter (which owner Elon Musk is rebranding as X) called Threads, a text conversation app tied to Instagram, in early July. The app topped 100 million sign-ups in less than a week, according to the company, but third-party measurement firms have reported a drop in daily user engagement since its debut. On the call, Zuckerberg said meta saw “dramatically” more people coming back to use Threads than expected and that the company is focused on building out features and driving it to the scale before monetizing it. “There’s still a lot basic functionality to build,” he said.
“We’ve run this playbook many times before, with Facebook, Instagram, WhatsApp Stories, Reels and more. And this is as good of a start as it as we can hope for,” Zuckerberg said.
Zuckerberg said Threads was built by a “relatively small team” on a tight deadline, leading to his larger point that he will run the company as efficiently as possible going forward.
