(News Bulletin 247) – The parent company of Facebook and Instagram has published growth and outlook above expectations, demonstrating that its spending on AI was not hampering its performance.

Meta is currently the best student of the “Magnificent Seven” of Wall Street. Alphabet, Microsoft and especially Tesla had all disappointed investors after publishing their quarterly results. The parent company of Facebook and Instagram, for its part, is delighting the market. Its share price rose 7% in pre-opening trading on Wall Street this Thursday, while the company led by Mark Zuckerberg delivered its accounts on Wednesday evening.

“Thanks to strong growth in advertising revenues, the group beat expectations in the second quarter across the board and revenue guidance for the third quarter was higher than expected,” Deutsche Bank summarises.

In the April-June quarter, Meta’s revenue rose 22% year-on-year to $39.1 billion, well above the $38.3 billion consensus estimate cited by Bank of America.

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A “healthy” advertising demand

The number of active users on the various social networks stood at 3.27 billion, up 7% over one year, while the average price per advertisement increased by 10%. So much so that the average revenue per user came to $11.89 against $11.65 expected by the consensus.

Another key figure followed by investors on Wall Street, earnings per share jumped 73% over the year to $5.16, while analysts were expecting $4.69.

Meta CFO Susan Li also said the company expects third-quarter revenue of $38.5 billion to $41 billion. At the midpoint of the range ($39.75 billion), that projection is above the LSEG consensus of $39.1 billion.

“We continue to see healthy global advertising demand, and we also continue to improve advertising performance through all of the investments we’ve made over time,” Susan Li said on a conference call.

“Any concerns investors may have had about Meta’s spending on AI and the metaverse will likely be allayed by these quarterly results,” eMarketer analyst Max Willens said, according to Reuters. “With such healthy margins, Meta investors should feel comfortable with the aggressive investments the company has planned for the future,” he added.

Towards the world’s most used AI assistant?

The market has recently been cautious about big tech spending to avoid missing the AI ​​and generative AI train. Last week, Alphabet’s stock market faltered despite beating expectations as the company warned it would spend more on AI than expected, $900 million more to be exact.

Meta has particularly raised eyebrows on Wall Street in recent years after it spent heavily on the metaverse, leading its Reality Labs division to post heavy losses. In the second quarter, the division posted an operating loss of $4.5 billion. Over two years, cumulative operating losses total about $35 billion.

CEO Mark Zuckerberg and Susan Li, however, were keen to explain to analysts the virtues of the company’s AI spending. The CFO, for example, explained that AI plays a central role in improving the group’s marketing performance and, therefore, monetization. “We are starting to test the possibility for companies to use AI in their conversations with customers to help them sell their goods and services and generate leads,” she said.

“On Facebook and Instagram, advances in AI continue to improve the quality of recommendations and drive engagement,” Zuckerberg said. Meta has notably rolled out its AI assistant, Meta AI, more widely. This tool can be used in 20 countries and eight languages.

“The bottom line is that Meta AI is becoming an important service and it’s rapidly improving in terms of intelligence and functionality,” Zuckerberg said. He said Meta AI is on track to become the most widely used AI assistant by the end of the year.