Meta misses on user growth, warns of 2025 jump in AI spending

Meta reported weaker-than-expected user numbers and warned of a significant acceleration in its infrastructure expenses in 2025 in its third-quarter earnings report on Wednesday. The company’s stock price was down slightly in after-hours trading. Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG: Earnings per share: $6.03 vs. $5.25 expected Revenue: $40.59 billion vs. $40.29 billion expected Sales in the third quarter jumped 19% year over year while net income grew 35% to $15.7 billion from $11.6 billion a year earlier. That represents Meta’s lowest year-over-year growth for net income since the second quarter of 2023. The company reported 3.29 billion daily active people for the third quarter. That was up 5% year over year but came in below analysts’ expectations of 3.31 billion. Meta also raised capital expenditures guidance for the 2024 fiscal year to between $38 billion and $40 billion, up from $37 billion to $40 billion previously. Additionally, the company said it expects capital expenditures to continue to grow significantly in 2025 due to an acceleration in infrastructure expenses. “Our AI investments continue to require serious infrastructure, and I expect to continue investing significantly there, too,” Meta CEO Mark Zuckerberg said Wednesday on a call with analysts. Zuckerberg has been pointing to the company’s massive investments in artificial intelligence, which includes spending billions of dollars on Nvidia’s popular graphics processing units, as helping improve the company’s core online ad business in the aftermath of Apple’s 2021 iOS privacy update. The company has been improving upon and building more data centers to help provide the technology infrastructure needed for its AI strategy. More than one million advertisers have used Meta’s generative AI advertising tools, Zuckerberg said. Meta said it expects total expenses for fiscal 2024 to be in the range of between $96 billion and $98 billion, which is lower than previous guidance of $96 billion to $99 billion. Meta’s advertising revenue came in at $39.9 billion for the quarter, up 18.7% year over year. Advertising accounted for 98.3% of Meta’s total revenue in the third quarter. Revenue from Meta’s Asia-Pacific region grew 15%, representing the company’s slowest-growing region, Chief Financial Officer Susan Li said on the call. That was down from growth of 28% in the second quarter, and Li attributed the deceleration to lapping demand from China advertisers. Investors were concerned that slower digital ad spending by China-linked online retailers such as Temu and Shein would affect Meta’s overall revenue. Meta said it is expecting fourth-quarter revenue to be between $45 billion and $48 billion. The midpoint of that guidance is higher than the analyst consensus of $46.3 billion. The company’s Reality Labs hardware unit posted an operating loss of $4.4 billion in the third quarter, which was less than analysts’ expectations of $4.68 billion. Sales in that unit jumped 29% year over year to $270 million in the third quarter, trailing analysts’ expectations of $310.4 million. Since 2020, Meta’s Reality Labs unit has recorded an operating loss of more than $58 billion. The company’s overall headcount grew 9% year over year to 72,404 as of Sept. 30. The social media company’s results come a day after digital ad companies Alphabet , Reddit and Snap all reported solid quarterly earnings. Microsoft reported third-quarter earnings on Wednesday that beat on the top and bottom lines. Alphabet on Tuesday said third-quarter sales from its Google Cloud unit came in at $11.35 billion, up 35% compared to a year prior. The company attributed its strong cloud results to its AI offerings, which include subscriptions for enterprise customers. Microsoft on Wednesday reported that revenue from its Azure cloud unit was up 33% year over year, with 12 points coming from AI services. Apple and Amazon report quarterly financials on Thursday.