Meta reports strong sales results in the third quarter

Meta has released its latest performance update, showing a small increase in active users across its apps and a relatively large increase in revenue.

However, investments in next-stage projects remain significant. Here's a look at the latest numbers from Mark Zuckerberg's tech giant.

First of all, about active users. Meta reports that 3.29 billion people now use its apps (Facebook, Messenger, WhatsApp, Instagram and Threads) daily, a small increase from the 3.27 billion in the second quarter.

However, we are talking about more than three billion people, the extent of which is difficult to understand.

The world's population is estimated at approximately 8.1 billion people, meaning Meta's apps are used by nearly 40% of the entire world's population every day. Minus the 1.4 billion population of China (where Meta is banned), and that's more like 50%, so the breadth of Meta's activity in that sense is pretty amazing.

And it's still growing. Although its apps are likely reaching saturation point in many markets, Meta is still seeing more users signing up for its apps, which bodes well for its continued potential and its core advertising business.

In fact, Meta also increases sales for these users on average:

Meta doesn't break out its ARPP results by market like it used to, but as you can see here, Meta's overall revenue per user is increasing and will increase again in the fourth quarter given the holiday rush.

This will help Meta further improve its sales revenue:

As you can see in this chart, Meta still relies on North America and Europe for the majority of its revenue, although the company is also steadily increasing its sales in Asia Pacific.

The company was able to record strong sales of $40.59 billion in the reporting period.

So while Meta spends a silly amount on VR and now AI development, the company continues to rake in the money from its main cash cow by showing people more ads in its apps.

Relatedly, Meta also reported that ad impressions served through its apps increased 7% year-over-year. The average price per ad is also increasing (+11% compared to last year), although the calculation is probably not ideal for social media marketers.

This essentially means that Meta shows more ads in more places to more users. This means more opportunities for marketers to reach their target audience, but instead of lowering the ad price by adding more placements, it actually increases it. I can understand why this is positive for Meta shareholders and the bottom line. But for advertisers, not so much.

Perhaps this will improve as more people take advantage of Meta Advantage+'s automated advertising campaigns, which fully automate ad placement, design and, if you like, even budgets and bidding. Meta says these ads deliver better results through improved understanding of behavior and that, at least in theory, this could help marketers optimize their ad delivery and potentially reduce overall costs.

Or simply deliver better results, making the more expensive ads worth it.

So more users, which further expands the already huge presence, and more ad revenue, which, as already mentioned, will also continue to increase in the fourth quarter. Everything seems to be going quite well for Zuck and Co.

Oh, except this:

Meta continues to lose money on VR and AI development, with total costs and expenses increasing 14% year over year.

And this hole is only getting deeper.

According to meta:

“We expect total spending for full year 2024 to be between $96 billion and $98 billion, updated from our previous range of $96 billion to $99 billion. For Reality Labs, we continue to expect operating losses to increase significantly year-over-year in 2024 due to our ongoing product development efforts and investments to further scale our ecosystem. We expect our full-year 2024 capital expenditures to be in the range of $38 billion to $40 billion, updated from our previous range of $37 billion to $40 billion.”

Additionally, Meta expects a “significant increase in capital expenditures in 2025” as the company works to build new AI data centers and other infrastructure for its next projects.

Meta is arguably the leader in VR and AR And AI development is based on its vast data sets, its years of developing related projects and the resources at its disposal. But that comes at a cost, and Meta still has to bear those costs since none of these projects are yet generating significant revenue for the company.

But they will do it. Well, hopefully.

Meta's AR glasses look set to be a hit as the company unveiled its new AR device at its Connect conference last month.

Functional AR will catch on at some point, and meta is likely to catch on at the moment if it catches on and becomes a bigger trend. And with sales of current Ray-Ban smart glasses increasing, indicators suggest that consumer demand for AR glasses will be significant.

The Metaverse also still exists as a longer-term project, and Meta is clearly paving the way for VR development, while its AI projects are also gaining momentum, with Zuckerberg once again praising the launch of his AI chatbot, which he now says the most often used AI chatbot tool on the market.

In fact, in his prepared statement, Zuckerberg attributed the company's strong performance to advancements and momentum around “meta-AI, llama adoption, and AI-powered glasses.”

Some of these remain speculative bets, but the signs are there and they all point to them becoming the new norm for connection and interaction in the near future. It's hard to imagine all humans interacting in VR headsets at some point, but the progress makes sense, and AI can also play an important role in that experience by helping users create their own custom VR worlds.

Although Meta's current AI tools seem fairly generic and don't add much to IG's Facebook experiences (the increasing use of the AI ​​chatbot is probably more an indication of Meta's size than the bot's popularity), I'm I don't think this is a great indicator of where meta is going on this front.

So a good result for Meta, or at least a largely expected one, as the ad business remains solid and development costs remain high. Despite predictions of further cost increases, I doubt there will be much of a market backlash against the company as the future remains quite bright for the company.

But rising costs will spook some investors, which could lead to a short-term setback.