AI was again a focus in Meta’s second-quarter earnings report, with the company reporting solid growth in both users and revenue during the period.
First, on the user front, Meta’s “Family Daily Active People” grew to 3.27 billion in the second quarter, up 7% year over year.
As you can see from this graph, Meta added over 30 million users across its apps during this period, though it’s not clear exactly where these users were active.
That’s because Meta currently only reports performance results for “Family,” which combines Facebook, Instagram, Messenger, and WhatsApp users into one metric, so we don’t have a specific breakdown of each and can’t report on trends, but we do know that WhatsApp usage in the U.S. has recently surged.
Facebook and Instagram usage is powered by Meta’s evolving AI recommendations, which increasingly surface video clips in your feed from profiles you don’t follow. While some users complain about seeing these random updates instead of posts from accounts they choose to follow, the numbers show that users are spending more time on each app as a result of seeing compelling video clips based on their interests.
So, love them or hate them, they’re here to stay. Meanwhile, the Twitter-like Threads app continues to steadily gain traction among a larger group of users.
Revenue-wise, Meta earned $39.07 billion for the quarter, up 22% from the same period last year..
A positive sign for Meta is that revenue is increasing in key markets (US and Europe) while new regions are growing with increased subscriber numbers. I think the downside to WhatsApp growth is fewer advertising opportunities, but Meta is clearly making up for it with more revenue potential in other apps.
Meta also announced that the total advertising amount The number of impressions delivered across the company’s apps increased 10% year over year, and the average price per ad also increased 10%.
That means more advertising and higher prices reflecting continued demand, suggesting Meta will remain strong for some time yet, which will also allow the company to continue investing in AI and VR, where it is still spending billions.
As the list shows, Meta lost an additional $4.5 billion in its Reality Labs VR division during the period as it continues to invest in both VR and AI projects, a higher percentage loss than last year, when it poured a record $17 billion into the division.
Meta’s total costs and expenses rose 7% to $24.22 billion in the second quarter, weighed down by its new AI data center.
So Meta is still investing heavily in the future of its business, and its VR-based metaverse vision remains a drag on its current performance: Meta’s VR headsets have sold steadily but are not yet a must-have, and its Ray Ban Stories glasses are also gaining traction as an early connector to the company’s tech.
But it remains to be seen whether Meta can weave its various long-term bets into a more cohesive platform at some stage.
The big opportunity for Meta, at least in my opinion, is integrating generative AI into VR creation, allowing users to build entire virtual worlds just by talking to them. Currently VR is limited due to the technical requirements of development, but if Meta can simplify this and give more people a path to VR creation, it could significantly increase interest in the vision of the Metaverse, as more immersive technology becomes available to everyone.
This could be something that really drives adoption of VR, and hopefully the upcoming AR glasses will be more practical and popular than Apple’s VisionPro headset.
In fact, Meta is currently looking to invest around $5 billion.n to EssilorLuxotticaThe company partnered with Ray-Ban sunglasses manufacturer , preventing competitors from using the same style frames and securing a valuable distribution channel for its upcoming AR products.
The path to success in this regard is becoming clearer, but will require continued investment for some time yet.
And while that will put pressure on Meta’s current performance, it also opens the door to future opportunities — and investors should be on board.
Basically, I’m not opposed to Zuckerberg and co. merging their various projects at this stage. I don’t think an AI chatbot is the right direction for Meta’s app, but a lot of these innovations are incremental behavior changes to accommodate what’s coming. So even if I don’t personally see the value in an AI bot, the next generation of Facebook and IG users might.
While there’s a lot to like about Meta’s numbers and many indications of future success on many fronts, not everything is clear yet, and of course there are still regulatory concerns and challenges ahead that Zuckerberg and his team will need to navigate.
But the report explains why Zuckerberg seems more open-minded about the company’s future direction.