Meta reported a strong second quarter for 2023 with increases in total revenue and other income categories. The tech company reported total revenue of $32 billion, an 11% increase year-over-year. Income from operations was $9.4 billion, a 12% increase year-over-year, and net income was $7.8 billion, a 16% increase year-over-year, or $2.98 diluted earnings per share, representing a 21% increase year-over-year. Operating margin held steady at 29%, while Meta’s effective tax rate decreased from 18% for the second quarter last year to 16% in the most recent quarter.

“We had a good quarter. We continue to see strong engagement across our apps and we have the most exciting roadmap I’ve seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall,” said Mark Zuckerberg, Meta founder and CEO, in a July 26, 2023 news release.

Second quarter highlights

In terms of activity, Meta reported the following:

• Family daily active people (DAP) was 3.07 billion on average for June, a 7% increase year-over-year.
• Family monthly active people (MAP) was 3.88 billion at the end of June, a 6% increase year-over-year.
• Facebook daily active users (DAUs) were 2.06 billion on average for June, a 5% increase year-over-year.
• Facebook monthly active users (MAUs) were 3.03 billion at the end of June, a 3% increase year-over-year.

Additional financial and operational details include the following:

• Across Meta’s apps, ad impressions increased 34% year-over-year, while the average price per ad decreased 16% year-over-year.
• The company had free cash flow of $10.96 billion for the second quarter.
• Meta reported total costs and expenses of $22.6 billion, a 10% increase year-over-year, including $1.87 billion in accrued legal expenses and a restructuring charge of $780 million for the quarter.
• The company had $6.35 billion in capital expenditures, including principal payments on finance leases.
• Meta reported long-term debt of $18.38 billion as of the end of June.
• On June 30, Meta had cash, cash equivalents and marketable securities of $53.45 billion.
• Headcount decreased 14% to 71,469 as of June 30. Approximately half of the employees impacted by 2023 layoffs are included in the second quarter headcount.

In the earnings report, Meta said that since 2022, the company has looked for efficiencies in their operations and they are realigning their business and strategic priorities. The company said they have “substantially completed” layoffs, and they continue to look at consolidating their facilities and data center restructuring opportunities.

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

Outlook

For the third quarter, Meta estimates total revenue to range between $32 billion and $34.5 billion. They expect total expenses for the full year to range between $88 billion and $91 billion, an increase over their previous estimate of $86 billion to $90 billion. For the full year, Meta estimates capital expenditures of $27 billion to $30 billion. This is a decrease from earlier estimates of $30 billion to $33 billion.

“This outlook includes approximately $4 billion of restructuring costs related to facilities consolidation charges and severance and other personnel costs. We expect Reality Labs operating losses to increase year-over-year in 2023,” Meta said. “While we are not providing a quantitative outlook beyond 2023 at this point, we expect a few factors to be drivers of total expense growth in 2024 as we continue to invest in our most compelling opportunities, including artificial intelligence (AI) and the metaverse.”

Those factors include higher infrastructure costs, growth in payroll as they hire technical staff at higher salaries and operating losses for Reality Labs.

Regulatory environment

The company continues to monitor regulatory changes that could potentially impact them in the US and abroad.

“With respect to EU-U.S. data transfers, we saw a positive development with the European Commission’s adoption of a final adequacy decision, which allows us to continue to provide our services in Europe. This is good news, though broadly speaking, we continue to see increasing legal and regulatory headwinds in the EU and the US that could significantly impact our business and our financial results,” said Meta.

Threads

The company mentioned its new social media platform Threads but did not go into any detail. The platform launched on July 5. Within the first five days, the Twitter alternative had attracted 100 million users. By mid-July, estimates of the number of users were around 150 million, depending on the source. On July 21, Forbes reported that daily active users have declined 70% since its peak on July 7. They estimated daily active users were around 13 million, down from 44 million on July 7. While the social media app does not contain all the features social media users are accustomed to, Meta said they are working on new features to further engage users.

Insider Take

Meta had a solid second quarter with double-digit increases in total revenue, income from operations, net income and diluted earnings per share. Though the company also had a double-digit increase in costs and expenses, that is to be expected given the major restructuring and layoffs they have embarked on. Threads didn’t launch until the third quarter, and while it will impact usage from Meta’s “family of apps,” currently Threads is not monetized with advertising or subscriptions, so it may not impact the company’s bottom line for the balance of the year.

Investors seem impressed so far. On July 26, the day financials were reported, Meta ended the day at $298.57 per share. As of 7:59 p.m. EDT on July 28, Meta’s stock was valued at $325.48, just shy of its 52-week high of $326.20.

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.