By Katie Paul and Yuvraj Malik
NEW YORK (Reuters) -Meta Platforms beat expectations for third-quarter profit and revenue on Wednesday, helped by an austerity drive and a recovery in digital advertising ahead of the holiday season.
The company, which reported its best operating margins in two years, also trimmed expenses for the year.
Shares of Meta, which have risen nearly 150% so far this year, gained 3% in after-hours trading.
The Facebook and Instagram owner has been climbing back from a bruising 2022.
Last year, it spent billions on the metaverse – or shared virtual world environments which people can access via the internet. It shed 21,000 employees since last autumn after a post-pandemic pullback in spending by customers.
CEO Mark Zuckerberg, who promised in February that 2023 would be Meta’s “year of efficiency,” told analysts on a conference call on Wednesday that he was pleased with the company’s progress on that front.
He said it provided stability for the company to “see our long-term initiatives through in a very volatile world.”
Meta’s “year of efficiency” could morph into “years of efficiency,” said Evercore ISI analyst Mark Mahaney.
Following rising investments into artificial intelligence by rivals Alphabet and Microsoft, Meta is now funneling money into the technology as well.
Zuckerberg said AI would constitute Meta’s biggest investment area in 2024, both in terms of engineering and computing resources. The company will continue to de-prioritize a number of non-AI projects, he said.
Meta’s operating margin in the third quarter doubled to 40%. Revenue grew at its quickest pace in two years as well.
It cut total 2023 expenses to between $87 billion and $89 billion, from a previous range of $88 billion to $91 billion.
The social media company also said it expected 2024 total expenses in the range of $94 billion to $99 billion, higher than estimates, according to LSEG data.
It declined to give new information about 2024 expenditures, citing the same higher infrastructure investments, hiring plans and expected losses on its metaverse-oriented Reality Labs unit as in the previous quarter.
Advertisers banking on resilient consumer spending flocked to the social media company’s digital platforms ahead of the holiday shopping season, a rebound that also boosted ad sales at Alphabet and Snap.
In the third quarter ended Sept. 30, Meta’s ads viewed increased by 31% from a year earlier. The average price per ad decreased by 6%, but the pace of fall was the slowest in seven quarters.
“The anticipated global surge in digital ad spending, poised to hit $667.6 billion next year, combined with Meta’s effective execution and cost control, puts the company on strong footing,” said Insider Intelligence principal analyst Jeremy Goldman.
Meta also warned again on regulatory pressures ahead and on additional spending on infrastructure.
Revenue rose 23% to $34.15 billion for the quarter ended September. Analysts were expecting revenue of $33.56 billion, according to LSEG data.
Meta’s daily active people (DAP) grew by 7%. The company uses the metric to track unique users who used any one of its apps such as Facebook, Instagram, Messenger or WhatsApp in a day. DAP grew 7% in the preceding June quarter.
Facebook’s daily active users grew by 5%, while ad impressions across Meta’s apps grew 31%.
(Reporting by Katie Paul in New York and Yuvraj Malik in Bengaluru Editing by Anil D’Silva, Sayantani Ghosh and Matthew Lewis)