Meta Platforms reported third-quarter earnings that beat revenue expectations but missed on earnings per share, underscoring the company's struggle to keep its ad business humming while pouring money into future technology.
The numbers
Revenue came in above analyst forecasts, driven by continued strength in digital advertising. But earnings per share fell short of Wall Street estimates, a sign that Meta's spending on artificial intelligence, virtual reality, and other long-term bets is eating into profits. The company didn't provide specific figures in the brief earnings release, but the miss was enough to rattle investors in after-hours trading.
Why the tension matters
The results highlight a central challenge for Meta: how to sustain the ad growth that funds its operations while investing heavily in what CEO Mark Zuckerberg calls the next computing platform. Meta has been pouring billions into AI infrastructure, data centers, and its Reality Labs division, which builds VR headsets and AR glasses. Those bets are expensive and may not pay off for years.
At the same time, the core advertising business faces headwinds. Apple's privacy changes have made it harder to target ads, and competition from TikTok and other platforms is fierce. Meta has responded by leaning into AI-powered recommendation systems and short-form video, but those efforts also require significant investment.
Investors will be watching Meta's next earnings call for clues on whether the spending is starting to generate returns. The company has signaled that 2024 will be a year of heavy investment, with capital expenditures expected to rise. Meta also faces regulatory scrutiny in the US and Europe, which could affect its ability to monetize user data.
For now, the message from the earnings report is clear: Meta can still grow revenue, but the cost of chasing the future is getting higher. The next quarterly report will show whether that trade-off is paying off.
