Jeff Bottari/Zuffa LLC
- Meta Platforms soared 9% on Thursday after the company's second-quarter earnings beat analyst estimates.
- The stock surge added $69 billion to Meta's market valuation as investors cheered the rebound in advertising revenue.
- Meta CEO Mark Zuckerberg also talked up the potential of its Twitter competitor, Threads.
Meta Platforms surged as much as 9% on Thursday, adding $69 billion to its market valuation after the social media company reported strong second-quarter earnings.
GAAP EPS of $2.98 beat estimates by $0.07, and revenue of $32 billion topped estimates by nearly $1 billion while representing year-over-year growth of 11%. Across all of its products, Meta reported a record 3.88 billion monthly active users in the month of June, representing year-over-year growth of 6%.
A significant rebound in advertising revenue, combined with the company's "year of efficiency" cost cuts, helped drive the better-than-expected earnings results. And Zuckerberg expects those tailwinds to continue, with Meta offering solid third-quarter revenue guidance of $32 billion to $34.5 billion, well ahead of estimates of $31.1 billion.
Apple's iOS privacy change in 2021 made it difficult for social-media companies to track users, weighing on ad revenue. But Meta revenue has been recovering.
Zuckerberg also highlighted Meta's new product launches that are resonating with its customers, including continued growth in its TikTok competitor Reels, and its recent launch of Twitter competitor Threads.
"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," he said.
When it comes to Threads, he said the company is focused on building on the momentum it saw when it first launched earlier this month, in which it gained 100 million users in the first week.
"Now we're focused on retention and improving the basics. And then after that, we'll focus on growing the community to the scale that we think is going to be possible. Only after that we're going to focus on monetization. We've run this playbook many times before with Facebook, Instagram, WhatsApp, Stories, Reels and more. And this is as good of a start as we can hope for," Zuckerberg said of Threads.
Meanwhile, from a cost-efficiency perspective, Meta lowered its full-year capital expenditures guidance to a range of $27 billion to $30 billion from a previous forecast of $30 billion to $33 billion.
"Now that we've gotten through the major layoffs, the rest of 2023 will be about creating stability for employees, removing barriers that slow us down, introducing new AI power tools to speed us up ... and so over the next few months, we're going to start planning for 2024. And I'm going to be focused on continuing to run the company as lean as possible," Zuckerberg said.
Wall Street was impressed with Meta's results.
Goldman Sachs raised its Meta price target to $384 from $335, saying that the company "has clearly returned the platform to elements of revenue growth, margin expansion and long-term focus that had been missing since [the] second half of 2022."
JPMorgan raised its price target to $425 from $305, saying that "despite ramping investments, we believe Meta can still drive higher EPS given revenue upside and previously established cost efficiencies."