Meta quarterly profit jumps but it sees volatility in ad market

SAN FRANCISCO — Meta on Wednesday reported that its quarterly profit more than doubled from last year's figure as it looks ahead at a volatile ad market and lawsuits accusing it of profiting from "children's pain".

"Meta earnings looked pretty good," said independent tech analyst Rob Enderle.

"They have clearly cut back on the bleeding surrounding their metaverse efforts and the company appears to be on a more even keel right now."

The tech giant said it made a profit of $11.6 billion as ad revenue climbed 23 per cent to $34 billion when compared to the same period a year earlier.

"We had a good quarter for our community and business," said Meta Chief Executive Mark Zuckerberg.

The number of people using Facebook monthly rose slightly to 3.05 billion in a year-over-year comparison while monthly active users of Meta's "family" of apps was 3.96 billion in a 7 per cent increase from the same quarter in 2022, the company reported.

Meta said it had trimmed costs, with layoffs and other belt-tightening measures started last year providing "greater efficiency".

Meta had suffered a rough 2022 amid a souring economic climate and Apple's data privacy changes, which allowed users to block ad targeting, the pillar of Meta's business.

Meta's vow of austerity on spending brought an unprecedented round of cost-cutting that saw the company lay off tens of thousands of workers since last November.

Meta shares, which closed the formal trading day down, fell more than 3 per cent further in after-hours trades to $289.50.

Chief financial officer Susan Li said during an earnings call that Meta is seeing "volatility" in an ad market that started to soften when the conflict between Israel and Hamas began.

"It's hard for us to attribute demand softness directly to any specific geopolitical event," Li said.

"We have seen broader demand softness follow other regional conflicts in the past, such as in the Ukraine war, so this is something that we're continuing to monitor."

Lawsuit peril 

Analyst Enderle maintained that Meta is at risk from lawsuits poised to damage its image and its wallet.

Dozens of US states this week accused Meta of profiting "from children's pain", damaging their mental health and misleading people about the safety of its platforms.

"In seeking to maximise its financial gains, Meta has repeatedly misled the public about the substantial dangers of its Social Media Platforms," argued a joint lawsuit filed in federal court in California.

The states accused Meta of exploiting young users by creating a business model designed to maximise time they spend on the platform despite harm to their health.

In total more than 40 states are suing Meta, though some opted to file in local courts rather than join in the federal case.

Meta said the states were singling it out unfairly instead of working with social media companies to develop universal standards for the whole industry.

"This landmark lawsuit could herald a seismic shift in how social media platforms approach product features and user engagement," said Insider Intelligence principal analyst Jeremy Goldman.

"That said, even as tech stocks face uncertainty, Meta's consistent performance cements its leadership in the digital realm."

Meanwhile, the European Union is seeking details on measures Meta has taken to stop the spread of "illegal content and disinformation" in light of the conflict between Israel and Hamas.

The AI race

The tech giant is putting artificial intelligence into digital assistants and smart glasses as it seeks to gain lost ground in the AI race.

"I'm proud of the work our teams have done to advance AI and mixed reality with the launch of Quest 3, Ray-Ban Meta smart glasses, and our AI studio," Zuckerberg said in the earnings release.

The second-generation Meta Ray-Ban smart glasses made in a partnership with EssilorLuxottica have a starting price of $299.

"Smart glasses are the ideal form factor for you to let AI assistants see what you're seeing and hear what you're hearing," Zuckerberg said.

Meta has taken a more cautious approach than its rivals Microsoft, OpenAI and Google to push out AI products, prioritising small steps and making its in-house models available to developers and researchers.

"The majority of the world's population will have their first experience of generative artificial intelligence with us," Meta chief technology officer Andrew "Boz" Bosworth told AFP in a recent interview.

Meta recently unveiled AI-infused chatbots with personalities, along with tools for creating images or written content using spoken prompts.