Meta’s Profits Surge in First Quarter

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Facebook-owner Meta has reported soaring profits in the latest quarter, driven by stellar ad growth across its family of world-leading social media apps. The company founded by Mark Zuckerberg said that net profit in the January to March period rose to $12.4 billion, with total revenue, mainly from selling ads, up an impressive 27% at $36.5 billion.

According to analyst Debra Williamson of Sonata Insights, Meta’s growth is attributed particularly to its sophisticated advertising tools and the success of ‘Reels,’ the algorithm-fueled short videos similar to TikTok’s format.

In another potential boost to its business, Meta could also start selling advertising on Threads, its text message platform akin to X (formerly Twitter), by the end of the year. “Advertisers who are looking to reach audiences during real-time moments will finally have a viable alternative to X,” said Mike Proulx, vice-president at Forrester.

The rise in sales and profit continued Meta’s rebound in 2023, which came thanks to drastic cost-cutting measures, including massive layoffs in what Mr. Zuckerberg dubbed the “year of efficiency,” after a challenging 2022. Meta said its global workforce now stands at 69,329, slightly more than last quarter but down from a peak of over 87,000 employees in 2022.

The company ended last year with record revenues, and since then, its share price has been soaring on Wall Street, thanks in particular to enthusiasm for artificial intelligence (AI), with its stock almost tripling in 2023 and up another 40% in 2024.

However, shares for Meta were down sharply in after-hours trading today, with investors concerned about expenditure creeping back up. “For all the recent scrutiny of its effectiveness, Meta’s ad business is humming,” said Max Willens, senior analyst at EMARKETER. “It will need to continue that upward momentum in the face of rising costs.”

Regarding the metaverse, which CEO and founder Mr. Zuckerberg describes as the future of the internet, the group’s dedicated branch once again posted substantial losses of $3.8 billion, although less than expected.

Another area of interest for the market is Meta’s progress in generative AI, the ChatGPT-style production of text, images, and other content based on simple queries in everyday language. Last week, Mr. Zuckerberg unveiled the latest version of Meta AI, which is now being deployed as a beefed-up smart assistant across its apps, including Instagram, WhatsApp, Messenger, and Facebook.

“This means users just start inherently using Meta AI without the friction of having to download and learn a new app experience,” said Forrester’s Proulx, referring to rival chatbots like ChatGPT or Claude. The technology is being rolled out in more than a dozen countries, including Australia, Canada, Singapore, and the US.

The AI is powered by LLaMA 3, the company’s most powerful large language model, which Meta makes available to developers as an open-source product to create their own tools.

The tech giants are locked in a race to emerge as a leader in AI, with Microsoft, thanks to its partnership with ChatGPT-maker OpenAI, seen as the frontrunner. AI is giving a lift to Microsoft’s core cloud computing business, a service that Meta does not provide, leaving some doubt over the high costs of deploying the technology.

While Meta has fallen behind on AI, “thanks to its platforms, it has a massive user base to test AI experiments… and quickly evaluate those its users gravitate towards,” said Ms. Williamson.

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