Meta, the parent company of Facebook and Instagram, reported higher-than-expected earnings for the first quarter of 2023, despite a year-over-year drop in net income.
Overall, the company reported revenue of $28.65 billion, a 3% increase over the previous year, and net income of $5.7 billion (or $2.20 per share), a 24% decrease. According to Refinitiv, analysts expected Meta to report revenue of $27.65 billion and earnings per share of $2.03.
In addition, Meta issued a relatively upbeat forecast for the second quarter of 2023, projecting total revenue of $29.5 billion-$32 billion, up from $28.82 billion in the same quarter last year.
In announcing its first-quarter results, Facebook stated that it had 2.04 billion daily active users in March, up from 2.0 billion the previous quarter. Meta reported 3.02 billion daily active users on average across all of its apps in March, a 5% increase year over year.
“We had a good quarter, and our community continues to grow,” said Mark Zuckerberg, chairman, CEO, and co-founder of Meta. “Our AI efforts are yielding positive results across our apps and business.” We’re also becoming more efficient so that we can build better products faster and be better positioned to deliver on our long-term vision.”
During the earnings call, Zuckerberg stated that Meta’s Reels product is gaining market share in short-form video, where it competes with TikTok and YouTube Shorts. He claims that Facebook and Instagram users now share Reels 2 billion times per day, a figure that has more than doubled in the last six months. Meta has monetized Reels at a lower rate than the company’s other ad units, and Reels cannibalizes time spent in the Facebook or Instagram feeds; CFO Susan Li told analysts that Meta expects Reels to be “revenue neutral” by the end of 2023 or early 2024.
Zuckerberg praised Meta’s artificial intelligence work, calling it a “major investment for us.” He claimed that the company can now do “leading work” in AI “at scale.”
The company has begun a “year of efficiency,” as Zuckerberg has dubbed its cost-cutting efforts. Meta laid off 11,000 employees in November and announced another 10,000 layoffs last month. As of March 31, the company stated that it had completed the majority of the 2022 employee layoffs while “continuing to assess facilities consolidation and data center restructuring initiatives.” In Q1, Meta incurred $621 million in additional pre-tax restructuring charges.
In the first quarter, Meta’s total costs and expenses were $21.42 billion, a 10% increase year on year. This included a $1.14 billion restructuring-related charge in the first quarter.
In October 2021, Zuckerberg changed the name of the company from Facebook to Meta, signaling a shift toward “metaverse” products and services. However, Meta’s Reality Labs division, which includes its Quest VR headsets, has been losing money. The Reality Labs segment generated $339 million in revenue (down 51%) and a $3.99 billion operating loss (up 35%) in Q1.
According to Zuckerberg, Meta is not reducing its investment in VR or AR products in favor of AI. “We’ve been focusing on both the metaverse and AI for years, and we will continue to focus on both,” he said during the conference call. Meta still plans to release a next-generation Quest VR headset aimed at consumers with a low price point in 2023.
Meta’s stock dropped 64% in 2022, losing $620 billion in market value — but it has recovered strongly this year, up 68% year to date as of Wednesday’s market close. Meta shares were up more than 12% in after-hours trading following the release of Q1 results.
