Meta Gets Back to Form in Its Q3 2023 Earnings

10/25/23—Meta’s Q3 2023 earnings beat is only the latest example of a phenomenon I’ve seen many times before.

➡️ The company is under scrutiny on multiple fronts.

➡️ It faces increased competition from upstart competitors.

➡️ And there are renewed concerns over regulation and safety.

Yet, it manages to report earnings that come out well ahead of expectations.

Here are five factors that contributed to Q3’s results.

1️⃣ AI ad products

These came up over and over again on the earnings call. Meta’s Advantage product suite, which depends on AI to help advertisers optimize ads to meet their objectives, is now on a $10 billion revenue run rate, Zuckerberg said.

2️⃣ Reels

Reels was on a $10 billion run rate as of Q2, and today Meta said Reels is now revenue neutral. With every quarter that goes by, Reels is proving to be a stronger and stronger competitor to TikTok for ad dollars. (Side note: don’t expect more transparency about Reels revenue in the future; CFO Susan Li said this is the last quarter we’ll hear them talk about it.

3️⃣ Chinese advertisers

Chinese commerce and gaming companies that want to reach people outside of China boosted spending in the quarter.

4️⃣ An easier comparison to Q3 2022.

Worldwide revenue fell 4% in that quarter.

5️⃣ Competitors’ weakness.

Meta is also benefiting from the weaker performance of smaller social media companies like Snap and X in 2023.

What’s Ahead for Meta?

Looking ahead to Q4, the risk of a wider war in the Middle East will weigh on advertisers, and CFO Li noted some softness in ad revenue at the start of the quarter. Meta’s outlook of $36.5 billion to $40 billion in revenue in Q4 factors that in and amounts to a 13%-24% increase. Expect Meta to counterbalance any geopolitical-related softness in demand with AI advertising initiatives that attempt to capture the business world’s fascination with all things AI.