Meta sees profits soar in first quarter

Facebook-owner Meta on Wednesday said its quarterly profits soared last quarter as the company continues to see stellar ad growth across its family of world-leading social media apps.

The company founded by Mark Zuckerberg said that net profit in the January to March period rose to $12.4 billion with total revenue, mainly from selling ads, up an impressive 27 percent, at $36.5 billion.

According to analyst Debra Williamson of Sonata Insights, Meta's growth is due in particular to its sophisticated advertising tools and the success of "Reels", the algorithm-fueled short videos to be scrolled through in succession, copied from TikTok.

In another potential boost to its business, by the end of the year, Meta could also start selling advertising on Threads, its text message platform similar to X (formerly Twitter).

The rise in sales and profit continued Meta's rebound of 2023, which came thanks to drastic cost-cutting, including massive layoffs in what Zuckerberg dubbed the “year of efficiency” that saw tens of thousands of employees let go after a miserable 2022.

Meta said its global workforce now stood at 69,329, slightly more than last quarter, but down from a peak of more than 87,000 employees in 2022.

The company ended last year with record revenues and since then, its share price has been soaring on Wall Street, thanks in particular to enthusiasm for AI with its stock almost tripling last year, and up another 40 percent in 2024.

But shares for Meta were down sharply in after hours trading on Wall Street on Wednesday, with investors concerned about expenditure creeping back up.

"For all the recent scrutiny of its effectiveness, Meta's ad business is humming," said Max Willens, senior analyst at EMARKETER.

"It will need to continue that upward momentum in the face of rising costs," he added.

As for the metaverse (mixing real and virtual worlds via high-tech glasses and headsets), which CEO and founder Zuckerberg describes as the future of the internet, the group's dedicated branch once again posted a substantial losses of $3.8 billion, even if this was less than expected.

Another subject that interests the market is Meta's progress in generative AI, the ChatGPT-style production of text, images and other content, based on a simple query in everyday language.

Last week, Zuckerberg unveiled the latest version of Meta AI, which is now being deployed as a beefed up smart assistant across its apps, which include Instagram, WhatsApp, Messenger and Facebook.

"This means users just start inherently using Meta AI without the friction of having to download and learn a new app experience,” said Forrester’s Proulx, referring the rival chatbots like ChatGPT or Claude.

The technology is being rolled out in more than a dozen countries, including Australia, Canada, Singapore and the United States.

The AI is powered by LLaMA 3, the company’s most powerful large language model, which the company makes available to developers as an open-source product to create their own tools.

The tech giants are locked in a race to emerge as a leader in AI, with Microsoft, thanks to its partnership with ChatGPT-maker OpenAI, seen as the frontrunner.

AI is giving a lift to Microsoft’s core cloud computing business, a service that Meta does not provide, leaving some doubt over the high costs of deploying the technology.

Meta has fallen behind on AI, but "thanks to its platforms it has a massive user base to test AI experiments ... and quickly evaluate those its users gravitate towards," commented Williamson.