Meta Platforms Inc. shares surged after the social media firm's first-quarter earnings exceeded analysts expectations and signaled the beginning of a recovery in digital advertising.
First-quarter sales rose to $28.6 billion, a return to growth after three straight quarters of declines. The average analyst forecast is $27.7 billion, down from $27.7 billion a year ago. Aftermarket trading, shares rose more than 12%.
The company said revenue would be up to $32 billion, compared to the average estimate of $29.5 billion.
Meta, the site of Facebook, Instagram and WhatsApp, is working to move faster while reducing expenses in what Chief Executive Officer Mark Zuckerberg has dubbed the year of efficiency. As it pares costs, Meta is still investing in strategic areas such as artificial intelligence and the metaverse.
However, there were some setbacks, including in Meta's division focused on building virtual reality technology for the metaverse. Reality Labs generated $3.99 billion in operating losses and brought in revenue of $339 million - down 51% from a year earlier and less than analysts projected.
The metaverse will become a sideshow this year as the company is likely to double down on generative AI and large language models, said Mandeep Singh, an analyst with Bloomberg Intelligence. Not paring Reality Labs' investments could be a sticking point with investors. In the first quarter of 2015, capital expenditures grew to $7.09 billion, compared to $5.55 billion in the same period last year. Meta reported a net income of $5.7 billion, or $2.20 per share, higher than the average estimate of $2.01 per share.
The stock has surged 74% this year, reversing from its worst year in 2022 with a 64% drop in 2022. After closing at $209.40, shares rose as high as $236.20 in extended trading following Wednesday's report.
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