Meta Earnings: Revenue uncertainty for 2024 overshadows strong results; stock drops over 4%

Revenue for the period grew by 23%, the fastest pace since 2021.

Earlier this year, the company cut thousands of employees and a wide range of projects, while sharpening its focus on improving its advertising and algorithms with artificial intelligence. Talk of the metaverse, the virtual reality world that Chief Executive Officer Mark Zuckerberg renamed the company for, has been less frequent, particularly in front of the skeptical investor community.

Meta’s core advertising business has returned to growth. On Instagram and Facebook, Meta has been pushing short-form video, which it calls Reels. While that’s helped boost the time spent by users scrolling through the app, Meta’s advertisers are taking a while to get used to the new format.

These cost-cutting measures helped Meta's margins expand to 40% from 20% last year. For the remainder of the year, Meta cut its spending expectations to $87 billion from $89 billion earlier. For 2024, expenses are likely to range between $94 billion to $99 billion. Most of that expenditure will go towards building technology infrastructure to run complex AI and VR tools.

Reality Labs, the division that makes smart glasses and headsets, posted an operating loss of $3.7 billion on $210 million in revenue. Analysts had expected an operating loss of $3.94 billion on $313.4 million in revenue, on average.

Meta shares fell 4.2% in regular trade and 3.7% in afterhours trade on Wednesday night. Despite the drop, the stock is still up 140% so far in 2023.