July 26 (Reuters) – Meta Platforms (META.O) forecast third-quarter revenue above market expectations on Wednesday, sending shares up on signs that the improving economic environment will boost ad spending.
The company expects July-September revenue in the range of $32 billion to $34.5 billion, compared with analysts’ average estimate of $31.30 billion, according to Refinitiv data.
“We continue to see strong engagement across our apps and we have the most exciting roadmap I’ve seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall,” Meta Chief Executive Mark Zuckerberg said.
The revenue bump comes as the company also forecast that expenses would rise in both 2023 and 2024, citing costs including legal fees and increased spending on infrastructure considered key to the tech sector’s feverish AI race.
Shares were up 4.2% in after-hours trading.
Meta also beat second-quarter revenue estimates. Revenue grew 11% to $32 billion in the quarter ended June 30, compared with analysts’ average estimate of $31.12 billion.
The social media giant has been climbing back from a bruising 2022, buoyed by hype around emerging AI technology and an aggressive austerity drive in which it has shed around 21,000 employees since last fall.
The company’s shares have more than doubled in value this year as a result.
Advertisers are reinforcing those gains by pumping money into digital ads again after months of muted spending, heartened by signs that the economy may overcome a bout of high inflation without suffering a major meltdown.
Brands are hedging their bets, however, and sticking with tried and true platforms, helping Meta and Google parent Alphabet (GOOGL.O) while punishing smaller players like Snap (SNAP.N), which reported disappointing sales on Tuesday.
Meta’s revenue forecast did not specify whether the figure includes any sales that might be contributed by the recently launched Threads app, which does not yet have ads.
The revenue gains provide relief as Meta makes massive investments to upgrade its infrastructure and stay competitive in an emerging arms race around AI technology, while continuing to invest more than $10 billion a year in a longer-term bet on “metaverse” hardware and software.
The company said it expected 2023 expenses in the range of $88 billion to $91 billion, compared with its previous forecast of $86 billion to $90 billion, due to “legal-related expenses.”
It said it expected “higher infrastructure-related costs” in 2024, as well as growth in payroll expenses “as we evolve our workforce composition toward higher-cost technical roles.”
Reporting by Katie Paul in New York and Yuvraj Malik in Bengaluru; Editing by Arun Koyyur and Matthew Lewis
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