NEW YORK, Oct 25 (Reuters) – Metaplatforms (META.O) on Wednesday reported third-quarter profit and revenue growth, supported by continued fiscal austerity and a rebound in digital ad spending ahead of the holiday season. It exceeded my expectations.

The company, owner of social media platforms Facebook and Instagram, which reported its highest operating margin in the past two years, also cut expenses this year.

But the company expects spending in 2024 to exceed Wall Street expectations as it pushes its hiring needs from this year into next and continues to invest in AI infrastructure. The company also hinted that the conflict between Israel and the Gaza Strip could reduce sales in the fourth quarter.

Meta’s stock, which has risen nearly 150% so far this year, reversed in after-hours trading, initially rising 3%, but reversing two hours later to trade 3% below its closing price.

Meta, which also owns WhatsApp, faced a painful 2022 in which investors fled as the company poured billions into Metaverse, a shared virtual world environment that people can access via the internet, amid competitive pressures and a post-pandemic recession. It is recovering from the year. With digital advertising.

Starting in fall 2022, the company has cut 21,000 employees, particularly in non-engineering departments. The company plans to hire more people next year and continues to focus on engineering talent, executives said.

CEO Mark Zuckerberg, who promised in February that 2023 would be Meta’s “year of efficiency,” told analysts on a conference call that artificial intelligence will be a major investment in 2024. He said it would be his top priority. The company will deprioritize many non-AI projects. He said the move was to avoid staffing increases, but did not provide further details.

Zuckerberg said the lean culture has provided Meta with stability to “stay through our long-term commitment in a very volatile world.”

Meta plans to end 2024 with “significantly more” employees than the roughly 66,000 employees it had at the end of September, CFO Susan Lee said.

Meta’s operating margin doubled to 40% in the third quarter. Revenue here also increased at the fastest pace in two years.

Total expenses for 2023 have been reduced from the previous range of $88 billion to $91 billion to a range of $87 billion to $89 billion.

The social media company said it expects total expenses in 2024 to be in the range of $94 billion to $99 billion, higher than expected, according to LSEG data.

The company declined to provide any new explanation for its spending, citing investments in AI infrastructure, hiring plans and expected higher losses at its metaverse-oriented Reality Labs unit, as in the previous quarter.

The company is rushing to update its data centers after delays in introducing AI-enabled hardware and software systems. Capital investment in 2024 will be in the range of $30 billion to $35 billion, and growth is expected to be driven by investment.

resilient advertising

Advertisers hoping for resilient consumer spending flocked to social media companies’ digital platforms ahead of the holiday season, resulting in Alphabet Inc.or snapAdvertising sales also increased.

In the third quarter ended September 30, Meta’s ad views increased 31% year over year. Average price per ad fell by 6%, but the pace of decline was the slowest in seven quarters.

The company forecast fourth-quarter sales of $36.5 billion to $40 billion, in line with analyst expectations.

Jeremy Goldman, Principal Analyst at Insider Intelligence, said: “Digital ad spending is rapidly increasing globally and is expected to reach $667.6 billion next year, coupled with Meta’s effective execution and cost management. , the company is on a strong footing.”

However, Mehta reported that the “softness” in ad spending early in the fourth quarter appeared to be related to the start of the conflict between Israel and Hamas. Mr. Lee said the impact was reflected in the company’s fourth-quarter outlook.

Mehta also warned again about future regulatory pressure, specifically plans by U.S. privacy regulators to strengthen a 2019 order that included a ban on monetizing the data of minors.

Revenue for the quarter ended September rose 23% to $34.15 billion. Analysts had expected revenue of $33.56 billion, according to LSEG data.

Meta’s Daily Active People (DAP) increased by 7%. The company uses this metric to track unique users who used any of its apps in a day, including Facebook, Instagram, Messenger, and WhatsApp. DAP also increased by 7% in June last quarter.

Facebook’s daily active users increased by 5%, and Meta’s ad impressions across apps increased by 31%.

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