Meta's Q3 Earnings: Revenue Growth Amidst Volatile Capital Spending and Strong Ad Pricing
2min read On October 31, Meta (META) hosted its 24Q3 earnings call, where the company's CEO articulated expectations for increased capital expenditures in the fourth quarter compared to the third. This uptick is largely driven by increased server and data center spending, although server-related expenditures are particularly contingent upon timing, as server deliveries occurred later in the third quarter. Consequently, the financial impact will manifest in the fourth quarter. The CEO emphasized the inherent volatility in capital spending each quarter due to infrastructure investments witnessing significant growth this year, with more anticipated in 2025.
During the third quarter, Meta introduced several new features, such as providing valuable account insights for businesses and creators to track performance, enabling multiple draft saves and pledged to integrate Thread with the Fetaverse. The company remains focused on enhancing Thread’s functionality and addressing user interests. However, Meta indicates that while there is satisfaction with Thread’s growth trajectory, it is unlikely to significantly drive revenue before 2025, as focus remains on delivering community-valued features and boosting growth and engagement.
On the monetization side, the CEO highlighted WhatsApp's progress, particularly in the "click to message" ad segments showing robust development. This focus continues in markets like Brazil, which show high user adoption, and Meta aims to replicate this growth in other regions, including the U.S., to unlock additional opportunities. Furthermore, much effort targets enhancing ad click efficiency and optimizing advertisers' targeted conversion events, with paid messaging underlining a key revenue driver, evidenced by a 48% growth in the third quarter from increased enterprise adoption and messaging volume.
Regarding advertising, Meta reported an 11% year-over-year increase in average ad pricing, fueled by strong demand and improved ad performance. The dynamics of pricing growth, particularly given the lower impression growth in the third quarter, reflect multiple factors, including auction dynamics shaped by fluctuations and impression shifts. Meta is intensely focused on conversion metrics provided to advertisers, judging success by their realized value over time.
During the Q&A section, questions arose about MetAI and its interaction patterns, namely the nature of queries seen and if they possess commercial intent. There's evolving thinking about forming an internal search product rather than collaborating with external companies. Discussion addressed ongoing infrastructure investments into 2025, correlating with growth strategy in key areas such as monetization and compliance. Though no precise details on 2025 staffing levels were provided, the budgeting process acknowledged strategic prioritization seeking measurable returns or opportunities.
Additionally, the potential of AI in elevating productivity and cost efficiency was highlighted, particularly in coding and internal productivity improvements. Though quantifiable data is scant, AI presents various efficiency opportunities, promising time savings and productivity boosts, especially in areas like content moderation, a key focus of Meta's LLM tool usage. Evaluating investment opportunities remains a continual process driven by return on investment assessments across strategic endeavors like AI and Reality Labs.
