Meta Platforms Inc. surged over 11% in premarket trading after reporting first-quarter revenue that exceeded analysts’ estimates and signaling the beginnings of a recovery in digital advertising.
The owner of Facebook, Instagram and WhatsApp, which spent the last few months aggressively cutting costs, reported quarterly revenue and user growth that beat analysts’ estimates. As Meta’s stock surged, Chief Executive Officer Mark Zuckerberg said that generative artificial intelligence was going to “impact every single one of our apps and services” and that Meta was well-positioned in the industry’s current AI race.
“A stronger financial position will enable us to weather a volatile environment while remaining focused on our longer-term priorities,” he told investors on a call Wednesday. “There’s an opportunity to introduce AI agents to billions of people in ways that will be useful and meaningful,” improving customer service chats with businesses, the advertisement creation process and the gaming experience in virtual reality, he said.
Zuckerberg explained how artificial intelligence technology has already helped the company choose the right short-form videos, called Reels, for its users. He said Meta is making more money from Reels, and time spent on Instagram has gone up by 24%.
Meta is working to move faster while cutting costs in what Zuckerberg has dubbed the “year of efficiency.” A slowdown in advertising demand over the last year forced the social media giant to slash headcount and reduce spending, and sparked scrutiny of the billions Zuckerberg has been investing in virtual reality technology. The company signaled that as it pares costs, it’s still willing to hire in a few key areas, such as generative AI.
First-quarter sales rose to $28.6 billion — a return to growth after three straight quarters of declines. That compared with the $27.7 billion average analyst projection. Shares gained more than 12% in after-market trading.
The company said revenue in the current quarter will be as much as $32 billion, compared to the $29.5 billion average estimate.
Meta continued to add users in the March quarter for Facebook, Instagram and WhatsApp. Altogether, more than 3 billion people used at least one of its products daily — a new milestone.
Still, there were some setbacks, including in Meta’s division focused on building virtual reality technology for the metaverse. The unit, called Reality Labs, had an operating loss of $3.99 billion in the quarter, and brought in revenue of $339 million — down 51% from a year earlier and less than analysts projected.
Zuckerberg addressed concerns that the company has shifted its focus away from metaverse development, not long after changing its corporate name, in favor of work on AI. “A narrative has developed that we’re somehow moving away from focusing on the metaverse vision, so I just want to say upfront that that’s not accurate,” he said. “We’ve been focusing on both AI and the metaverse for years now. And we will continue to focus on both. The two areas are also related.”
