Meta Q3 Earnings Preview: Will the Growth Story Continue?

Meta Platforms, Inc. (META) is set to report its third-quarter earnings on October 25, 2023, and investors are eager to see if the company can maintain its recent growth momentum. In this article, we will analyze Meta's user growth, revenue drivers, expenses, and the outlook for its Reality Labs division to provide insights into the upcoming earnings report.


1. User growth and engagement: Meta's user base continues to grow, with daily active users (DAUs) and monthly active users (MAUs) increasing year-over-year. In Q2 2023, DAUs reached 2.09 billion, and MAUs reached 3.05 billion. This growth can be attributed to the company's focus on enhancing user experience and engagement through new features like Reels and AI-driven recommendation improvements.
2. Revenue drivers: Meta's advertising segment is the primary driver of revenue growth. In Q2 2023, advertising revenue increased by 17% year-over-year, reaching $39.38 billion. The company's AI-driven ad optimization has led to an increase in ad impressions and a decrease in the average price per ad. Meta's focus on e-commerce, consumer packaged goods, and gaming has also contributed to the growth in advertising revenue.
3. Expenses and cost-cutting measures: Meta has implemented cost-cutting measures to improve profitability. In Q2 2023, total expenses decreased by 7% year-over-year, driven by lower costs in research and development, marketing and sales, and general and administrative expenses. The company's "year of efficiency" initiative has resulted in a 24% year-over-year decrease in headcount, further contributing to cost savings.
4. Reality Labs division: Meta's Reality Labs division focuses on virtual reality (VR) and augmented reality (AR) technologies. In Q2 2023, the division reported operating losses of $3.74 billion, bringing the total losses since the start of 2022 to nearly $25 billion. Despite the losses, Meta remains committed to investing in the division, as it believes VR and AR technologies will play a significant role in the future of computing and communication.


In conclusion, Meta's user growth, advertising revenue drivers, cost-cutting measures, and investments in the Reality Labs division will be key factors to watch in the upcoming earnings report. As the company continues to innovate and adapt to changing market conditions, investors will be looking for signs that the growth story can continue.