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Meta beats expectations for Q3 2023, despite future challenges

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Meta Platforms, the parent company of Facebook and Instagram, has surpassed expectations for its third-quarter revenue

Advertisers looking to capitalise on resilient consumer spending have flocked to Meta’s digital platforms, driving robust financial results.

The company also made adjustments to its expense forecast for the year, but it cautiously warned of forthcoming spending increases and regulatory pressures in 2024. For 2023, Meta now anticipates total expenses ranging between $87 billion and $89 billion, a slight reduction from its earlier projection of $88 billion to $91 billion.

Looking ahead to 2024, the social media giant predicts total expenses in the range of $94 billion to $99 billion, which is higher than initial estimates, as per data from the London Stock Exchange Group (LSEG). However, Meta refrained from providing additional details about 2024 expenditures, citing factors like increased infrastructure investments, hiring plans, and expected losses in its metaverse-focused Reality Labs unit, much like the previous quarter.

“The anticipated global surge in digital ad spending, poised to hit $667.6 billion next year, combined with Meta’s effective execution and cost control, puts the company on strong footing,” noted Jeremy Goldman, principal analyst at Insider Intelligence.

In response to this positive news, Meta’s shares surged by 4% in extended trading, reflecting renewed investor confidence in the company. After a challenging 2022, Meta has experienced a resurgence, driven by growing interest in emerging artificial intelligence technology, a revival in digital advertising, and an aggressive cost-cutting strategy that saw approximately 21,000 employees let go since the previous autumn.

The company’s shares have rallied significantly, with a nearly 150% increase in value so far this year.

In terms of financial performance, Meta reported a 23% increase in revenue, reaching $34.15 billion for the third quarter ending in September. Analysts had expected revenue to reach $33.56 billion, based on LSEG data. The company also exceeded profit expectations.

Key metrics, such as Meta’s daily active people (DAP), experienced a 7% growth. DAP is a metric used to track unique users who engage with any of Meta’s apps, including Facebook, Instagram, Messenger, or WhatsApp within a single day. This growth follows a 7% increase reported in the preceding June quarter.

Specifically for Facebook, daily active users saw a 5% uptick, while ad impressions across Meta’s suite of apps expanded by an impressive 31%.

Meta’s strong performance in Q3 2023 showcases its ability to attract advertisers and maintain user engagement, setting a positive tone for the upcoming holiday season. Nevertheless, the company remains cautious about the challenges it may face in the year ahead.

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Central bank expected to ease interest rates as election nears

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The Federal Reserve is expected to cut interest rates again this week, a move aimed at cooling inflation.

This quarter-point rate cut would bring the benchmark rate to about 4.6%, the second reduction this year.

Analysts expect that additional cuts could come in December, which would benefit borrowers by reducing loan costs.

If Trump were to win the election, economists say his proposals on trade and immigration could reignite inflation.

The Fed is balancing a strong economy and low unemployment with its inflation-calibrated rate cuts.

As Election Day approaches, all eyes are on both the Fed and the presidential race.

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Big Tech pushes AI investments

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Tech giants like Microsoft and Meta are accelerating AI data center spending, with massive capital pouring into these projects.

Microsoft and Meta reported on Wednesday that AI investments are spiking their expenses, while Alphabet announced similar trends.

Amazon, due to report earnings shortly, is expected to mirror these projections, foreseeing further pressure on profit margins.

Wall Street is getting wary of the financial strain, as each company’s stock took a hit this week despite strong quarterly numbers.

Shares of Meta fell over 3%, and Microsoft saw a 6% drop, underscoring Wall Street’s jitters.

“It’s expensive to keep up with AI technology demands,” says GlobalData’s Beatriz Valle, emphasising a competitive race in AI capacity.

The high-stakes investments are starting to test investor patience in Big Tech’s ambitious AI journey.

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Meta expects strong holiday ad revenue boost

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Meta’s holiday-quarter forecast beats expectations as AI tools drive growth

Meta Platforms, parent company of Facebook, has forecast holiday-quarter revenue that surpasses market expectations, anticipating a surge in ad spending as the year ends.

The projection comes as Meta’s AI-driven advertising tools and short-form video feature Reels have spurred revenue growth this year.

Meta’s shares dipped 2.5% in after-hours trading, despite a third-quarter profit of $6.03 per share—well above analysts’ forecast of $5.25.

Analysts expect digital ads to have a “blockbuster” year in 2024, helped by improved economic forecasts and steady consumer spending.

Meta, heavily reliant on advertising revenue, stands to benefit from increased holiday marketing as it eyes revenues of $45 to $48 billion this quarter.

The company’s third-quarter revenue reached $40.59 billion, narrowly topping analysts’ estimates.

With interest rates easing, analysts suggest Meta’s ad revenue could continue to thrive into the new year.

As holiday spending ramps up, Meta’s AI investments are paying off.

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