Shares of the Facebook-parent soared 12% after the bell, adding over US$50 billion to its stock market value as its profit also beat Wall Street estimates.
The company said its expenses for the year may be lower than it had forecast in March.
The strong results came as Meta’s tech rivals likewise appeared to be climbing out from an industry-wide slump that has prompted more than 150,000 layoffs across the sector.
Google parent Alphabet Inc reported results on Tuesday as its digital ad sales held up better than expected and demand rose for cloud services. Microsoft beat Wall Street’s estimates and said artificial intelligence products were stimulating sales.
Meta has kicked off an aggressive cost-cut drive, with plans to eliminate 21,000 jobs and flatten its middle-management structure as it works towards CEO Mark Zuckerberg’s goal of turning 2023 into the “year of efficiency”.
The results indicated that austerity drive was “off to a stronger than expected start for Meta,” said Insider Intelligence principal analyst Debra Aho Williamson.
“In this economic environment—and after the disaster that was 2022—3% year over year revenue growth is an accomplishment. Meta’s strong guidance for Q2 revenue is another indicator that the company may be starting to come out of the woods.”
The social media giant faced a bruising 2022 as a pandemic-era e-commerce boom sputtered, while rivals like TikTok captured young users and Apple Inc’s privacy updates cut access to the user data around which it built its ads business.
As it cuts costs, Meta is simultaneously carrying out several expensive overhauls to bolster its core business, including a massive project to upgrade AI capacity, while also investing US$10 billion a year in a longer-term bet on “metaverse” hardware and software.
“Our AI work is driving good results across our apps and business. We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long term vision,” Zuckerberg said.
Spending on the AI retooling has spiked the company’s capital expenditures, which came in slightly under expectations at US$7.1 billion for the quarter. Analysts had forecast US$7.2 billion in capital expenditures in the quarter, based on the company’s annual forecast of US$30 billion to US$33 billion, which it kept unchanged.
The company narrowed its annual expenses forecast to between US$86 billion and US$90 billion, down from the US$86 billion to US$92 billion it had predicted in March, when it announced its second round of layoffs.
Meta said its quarterly price per ad decreased 17% from a year earlier, while it expects current-quarter revenue between US$29.5 billion and US$32 billion, compared with analysts’ estimates of US$29.53 billion, according to Refinitiv data.
Net profit for the first three months of the year fell to US$2.20 per share from US$2.72 a year earlier, but beat expectations of US$2.03 a share.
Revenue for the first quarter rose 3% to US$28.65 billion, beating an average estimate of US$27.66 billion.
“We continue to expect Reality Labs operating losses to increase year-over-year in 2023,” Meta said in a statement, referring to its metaverse-oriented unit, into which the company had been investing billions of dollars and that lost US$13.7 billion last year.