Meta Platforms (META), previously known as Facebook, is set to announce its second quarter 2023 (2Q23) results in a conference call at 5:00 p.m. E.T. The financial statements are expected to be released just minutes before at 4:10 p.m. E.T, providing investors an opportunity to absorb the numbers before hearing the executive insights. The consensus estimate for Q2 as per FactSet is an Earnings Per Share (EPS) of $2.91 and revenue of $31.1 billion.
Q1 2023 Highlights
Looking back at the previous quarter, when META reported Q1 results on April 26, it guided for Q2 revenue of $29.5-$32.0 billion. The Q2 revenue forecast was noteworthy as it exceeded expectations, reflecting a positive trajectory for the company’s top line. It’s important to note that META also refined its fiscal year 2023 (FY23) expense guidance, trimming the range to $86-$90 billion from the previous estimate of $86-$92 billion. This demonstrates META’s stringent cost management approach as the original guidance was set at $94-$100 billion during the 3Q22 announcement.
Capital Expenditure
On the capital expenditure (Capex) front, the company retained its FY23 guidance at $30-$33 billion. META’s ongoing evolution from a social media company to a “Metaverse” company has brought about notable changes in its investment strategy. While it is scaling down its metaverse investments, META has been bolstering its AI capabilities to enhance its existing products like ads, Feed, and Reels. Furthermore, it is investing significantly in generative AI initiatives, indicating a shift in its focus.
Expectations for the Earnings Call
The upcoming earnings press release will likely provide an update on Q3 revenue guidance along with revisions to the FY23 expense and Capex forecast. To align with expectations, META’s Q3 revenue guidance must be at least $31.2 billion. This is significant as it would reflect the company’s confidence in sustaining the momentum and delivering strong growth in the subsequent quarter as well.
Influence of Alphabet’s Earnings
Alphabet’s (GOOG) upside Q2 earnings report has set a positive tone for the online advertising spending environment. The advertising giant’s revenue growth improved to 3.2%, bouncing back from a decrease in the previous quarter, which suggests a potential boost for META’s advertising revenues as well.
Threads and the AI Push
One of the main focal points will be Threads, META’s new messaging app that mirrors Twitter. Introduced by CEO Mark Zuckerberg on July 6, Threads saw an overwhelming response with 10 million sign-ups, which spiked to 30 million within a day. The crucial question now is how the company plans to monetize this massive user base.
Furthermore, Zuckerberg mentioned during the last earnings call that META is utilizing AI to optimize video distribution on its Reels platform. This innovation has reportedly improved monetization efficiency by over 30% on Instagram and above 40% on Facebook sequentially. AI has also contributed to a 24% increase in time spent on Instagram, indicating a successful user engagement strategy.
Conclusion
META’s shares have rocketed by more than 140% year-to-date, setting the bar high for the upcoming earnings report. However, with the company’s ongoing cost management, escalating ad spending, and AI-driven monetization strategies, another beat-and-raise report could be on the horizon. As we wait for the precise figures and guidance, one thing is certain – META is innovating at a rapid pace, and its future prospects look promising.
