Meta beat Wall Street’s revenue and profit targets during its third quarter and forecast a strong finish to the year in the holiday quarter. But the company’s plans to continue spending heavily on AI infrastructure and an increase in headcount may have tempered investor enthusiasm with the results.

Shares of the Facebook parent fell almost 3% in after hours trading immediately after revealing its third quarter results.

During the company’s conference call with investors, Meta executives cited strength in new efforts like generative AI and Threads, as well as solid growth in advertising sales across geographies. Total revenue for the quarter grew 19% year-over-year, to $40.59 billion, above analysts’ expectations. Net income rose 35% to $15.68 billion, and earnings per share came in $6.03, also above expectations.

The total number of people using one of Meta’s apps each day, including Facebook, Instagram and WhatsApp, grew by 5% to 3.29 billion. Meta AI, the AI chatbot that’s been rolled out across various Meta products, now has 500 million monthly users, the company said.

“We’re trying to make sure we get the right people working on this, and the right amount of investment, towards what we view as a very, very large opportunity,” CEO Mark Zuckerberg said about AI during the call. He said that the next step in the company’s AI strategy is to leverage the LLM models it has developed for use in business tools, promising new details early next year.

Zuckerberg has emphasized the company’s focus on cost discipline, describing an ongoing effort at “efficiency” which has included frequent rounds of layoffs over the past couple of years. Operating expenses growth of 13% during the quarter was slower than the company’s revenue growth, helping lift Meta’s operating profit margins to 43% versus the 40% level one year ago.

Yet Meta reported that its total headcount was up 9% year-over-year to more than 72,000 employees. Meta’s Reality Labs, the organization within Meta responsible for VR and AI work, lost a whopping $4.42 billion in the third quarter on $270 million of revenue, and Meta warned that it expects the division’s “operating losses to increase meaningfully.”

The company’s AI efforts have called for massive investments that show no sign of slowing down. Meta lifted the bottom-end of its planned capital expenditures range for the year, forecasting a cap ex between $38 billion to $40 billion, up from the previously guided range of $37 billion to $40 billion. And the company warned that it would continues to expect “significant capital expenditure growth in 2025.”

CFO Susan Li said that revenue in the fourth quarter should ranged between $45 billion and $48 billion, representing 12% to 20% growth from the prior year. While Meta said that its latest social media product Threads now has 275 million monthly users, Li said the company did not expect Threads to be a meaningful revenue driver in 2025.

Shares of Meta have rallied leading up the Wednesday’s earnings report, with Meta’s stock up 22% since August compared to the Nasdaq’s 8% gain during the same period.

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