Meta shares pop 6% on earnings beat, rosy revenue forecast

Meta shares jumped 6% on Thursday after the company reported second-quarter earnings that beat Wall Street’s expectations and offered a rosy revenue forecast.

Revenue in the period increased 22% to $39.07 billion from $32 billion a year earlier, Meta said late Wednesday. Analysts were expecting revenue of $38.31 billion, according to LSEG.

Net income soared 73% to $13.47 billion, or $5.16 per share, from $7.79 billion, or $2.98 per share, in the same period last year, reflecting hefty cost-cutting initiatives that started in late 2022. The company was expected to report earnings per share of $4.73.

For the third quarter, Meta expects revenue of $38.5 billion to $41 billion, or $39.75 billion at the middle of the range, topping the average analyst estimate of $39.1 billion.

Meta CEO Mark Zuckerberg and Chief Financial Officer Susan Li told investors that the company’s heavy spending on artificial intelligence is already paying off.

“The ways that it’s improving recommendations and helping people find better content, as well as making the advertising experiences more effective, I think there’s a lot of upside there,” Zuckerberg said on the earnings call. “Those are already products that are at scale. The AI work that we’re doing is going to improve that.”

Analysts at Baird said Meta’s business remains strong, and that it continues to benefit from “years of AI-related investments.”

They wrote in a report that Meta’s latest progress in AI will unlock revenue opportunities from higher levels of ad conversions, new digital assistants and multimodal content creation.

“May we suggest changing the ticker to ‘AIAI,'” the analysts wrote in a note Wednesday.

Bank of America analysts said in a report that they see Meta as the top AI play in consumer internet. They said there is evidence that the technology is driving strong ad growth and growing core app users, particularly with younger audiences.

The analysts note that Meta’s capital expenditures are increasing because of AI infrastructure spend, but it is driving “tangible business results.” There are also newer generative AI products that have the potential to open revenue opportunities over multiple years, they said.

Meta said capital expenditures for the year will be between $37 billion and $40 billion. The low end of the range had previously been $35 billion.

Barclays analysts wrote in a note Wednesday that Meta is executing at “arguably the best pace of any company in digital advertising.”

“For now, the investment community is giving META and all the hyperscalers a pass on what looks to us like an AI capex overbuild, but it’s going to bring in a bunch of new and exciting products that aren’t baked into revenue forecasts,” the Barclays analysts wrote.

— CNBC’s Michael Bloom and Jonathan Vanian contributed to this report.