TMTPOST -- Meta Platforms, Inc. shares rose as much as 8% and closed 4.2% higher Thursday. Share rallied after the Facebook operator flexed muscles in digital advertising for last quarter and continued to ratchet up artificial intelligence (AI) spending.
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Meta beat Wall Street expectation both top and bottom line for the quarter ended March 31. Revenue popped 16% year-over-year (YoY) to $42.31 billion, better than analysts estimated $41.38 billion. Though sales cooled compared with a 21% YoY increase for the previous quarter. Diluted earnings per share (EPS) was $6.43 with a 37% YoY increase, compared with projection of $5.25 per share. Operating income soared 35% YoY to $17.56 billion and operating margin increased 3 percentage points YoY to 41%, also above estimated income of $15.52 billion with a margin of 37.5%.
The closed-watched bread & butter advertising earned $41.39 billion with a 16% YoY rise, versus analysts estimated $40.55 billion. Meta needs its advertising business to continue growing in order to fund an expensive expansion in artificial intelligence, which is driving the future of the business through improvements to ads, algorithms and personalization.
Family of Apps revenue added 16% YoY to $41.90 billion for the first quarter, compared with expected $40.89 billion. Revenue from Reality Labs, the hardware unit that houses metaverse technologies, dropped 6.4% YoY to $412 million, missing expectation of $496 million.
"We've had a strong start to an important year, our community continues to grow and our business is performing very well," said Meta founder and CEO Mark Zuckerberg. "We're making good progress on AI glasses and Meta AI, which now has almost 1 billion monthly actives." “I think we’re well positioned to navigate the macroeconomic uncertainty,” Zuckberg said on an earnings conference.
Meta’s guidance was also solid. It expected revenue for the second quarter to be in the range of $42.5 billion to $45.5 billion, in line with the estimate of $44.1 billion.For the full year, Meta called for total expenses to be in the range of $113billion to $118 billion, down from the prior outlook of $114billion to $119 billion.
But perhaps most important, at a time when investors were freaking out about sliding AI spending, Meta boosted its capital expenditure (Capex) forecast. It now sees Capex for this year be in the range of $64billion to $72 billion, increased from its prior outlook of $60billion to $65 billion. That represented a lift of more than 7%.
“This updated outlook reflects additional data center investments to support our artificial intelligence efforts as well as an increase in the expected cost of infrastructure hardware,” Meta said in the earnings release.
