Meta Platforms had a successful Q2, reporting double-digit growth for the first time since Q4 2021. The performance was attributed to a rebound in the digital advertising sector. The good news comes with a warning, as the company says it plans to increase spending on virtual reality and artificial intelligence next year. The parent of Facebook and Instagram reported revenue of just under $32 billion for the period ending June 30, an 11 percent gain over 2022. Advertising contributed a whopping $31.5 billion, growing nearly 12 percent year-over-year.

The Wall Street Journal reports that the robust advertising growth is a result of “improved use of AI technology that has enabled better ad-targeting, after Apple privacy changes in 2021 cost the company $10 billion in sales.”

Meta CEO Mark Zuckerberg told analysts that core products are “performing well” and he is looking forward to what’s next. “I think we have the most exciting roadmap ahead that I’ve seen in a while,” he noted. “We’ve got continued progress on Threads, Reels, Llama 2, and some groundbreaking AI products in the pipeline as well as the Quest 3 launch coming up this fall.”

“Thus far in 2023, Meta has seen its shares more than double as Zuckerberg has focused on cost-cutting, developing new generative AI technology and the launch of Threads, a micro-blogging app the company launched to compete with the business formerly known as Twitter, which billionaire owner Elon Musk rebranded as X,” WSJ writes.

Launched as an adjunct to Instagram, Threads hit 100 million signups within five days, making it the fastest growing app in history, though the pace has since slowed.

The billions of dollars the company has invested in AI “are clearly paying off across our ranking and recommendation systems and improving engagement and monetization,” Zuckerberg said.

As for monetizing open-source Llama, the CEO added that cloud-based companies “basically reselling it” will provide a cut to Meta, as in the deal with Microsoft. “I don’t think that that’s going to be a large amount of revenue in the near term, but over the long term, hopefully, that can be something,” Zuckerberg told analysts.

Meta’s net profit surged 16 percent versus last year, to $7.8 billion for the quarter, also marking a healthy rise from Q1’s $5.7 billion. The company’s “year of efficiency” seems to be paying off. Zuckerberg said Threads, which launched July 5, “was built by a relatively small team on a tight timeline.”

The remainder of 2023 “will be about creating stability for employees, removing barriers that slow us down” and “introducing new AI-powered tools to speed us up.”

While the company will continue to in invest in the metaverse and in AI, with Zuckerberg hinting that capital expenditures in those areas will grow in 2024, capex for 2023 has been downward revised to “$27 billion to $30 billion,” versus an earlier estimate of $30 billion to $33 billion.

CNBC reports that “the reduced forecast is due to both cost savings, particularly on non-AI servers, as well as shifts in capital expenditures into 2024 from delays in projects and equipment deliveries rather than a reduction in overall investment plans.”

Related:
Facebook Surpasses 3 Billion Monthly Active Users, TechCrunch, 7/26/23
Meta Has a Rare Opportunity to Seize Momentum with Threads, Bloomberg, 7/27/23