Meta Platforms’ stock rose 10% Thursday after the social media company posted blowout earnings

Meta Platforms (NASDAQ:META) stock surged higher Thursday after the corporate released its second quarter earnings results, which far exceeded what analysts had predicted.

The Magnificent Seven stock generated $39.1 billion in revenue, a 22% increase over the identical quarter a 12 months ago. Analysts had anticipated $38.3 billion in revenue. Net income increased a whopping 73% year-over-year to $13.5 billion, or $5.16 per share. This crushed estimates of $4.70 per share.  

Meta stock is now up some 48% YTD and 64% over the past 12 months. Among the many Magnificent Seven stocks, only NVIDIA (NASDAQ:NVDA) has performed higher.

Operating margin expands to 38%

It was a robust quarter for the social media giant as many of the key metrics were rising. The variety of every day lively people (DAP) on its platforms climbed 7% within the June quarter, with a median of three.3 billion people per day.

CEO Mark Zuckerberg cited progress in boosting the numbers of users within the 18-to-29-year-old range on its platforms. He also called out the expansion of Threads, its newest social media site, which already has near 200 million monthly users.

Also, its ad impressions jumped 10%, as did the common price per ad. Most of Meta’s revenue comes from promoting on its sites, which generated $38.3 billion in revenue, up 22% year-over-year. Its Reality Labs virtual reality Metaverse business made just $353 million, but that was up 28% from the identical quarter a 12 months ago.

Further, its costs and expenses rose 7% to $24.2 billion, but its higher than anticipated revenue allowed the firm to spice up its operating margin significantly to 38%, from 29% in Q2 of 2023.

All in on AI

Meta continues to speculate heavily in AI and Zuckerberg sees it as a key growth driver, across the corporate, not only throughout the Metaverse.

For instance, inside promoting, AI won’t only help advertisers reach a certain audience; it’s going to find a way to generate creative as well.

“Over the long run, advertisers will mainly just find a way to inform us a business objective and a budget, and we’re going to go do the remainder for them,” said Zuckerberg. “I believe that is going to be a really big deal.”

Zuckerberg also cited the expansion of its Meta AI assistant, which he said is on the right track to be probably the most used AI assistant by the top of 2024.

The corporate also just rolled out AI Studios, which allows people to create their very own AIs to interact with across all of Meta’s apps. And it sees great potential in Business AI, which enables businesses to have their very own AI capabilities.

“Over time I believe that identical to every business has an internet site, a social media presence, and an email address, in the longer term I believe that each business can be going to have an AI agent that their customers can interact with,” Zuckerberg said. “Our goal is to make it easy for each small business, and eventually every business, to drag all of their content and catalog into an AI agent that drives sales and saves them money.”

In its outlook, Meta increased is full 12 months capital expenditures to a variety of $37 billion to $40 billion, up from $35 billion to $40 billion, due largely to spending on AI. In 2025, the corporate expects significant growth in capital expenditures because it invests in artificial intelligence research and product development efforts.

Is Meta stock a buy?

For the third quarter, Meta anticipates revenue to be within the range of $38.5 billion to $41 billion, up barely over Q2 on the high end.  

For the full-year, expenses are projected to be within the range of $96 billion to $99 billion, which is in step with past guidance. Much of this shall be earmarked for AI and product development, particularly inside Reality Labs, because it looks to scale up that ecosystem.

Higher AI spending is often welcomed by investors, because it not only means Meta is investing in its future growth; it also creates growth opportunities for suppliers throughout the AI universe.

Its growth in promoting and users, as well las its investments in AI, are the chief the explanation why Meta stock got a slew of price goal upgrades post-earnings.

Most of the most important Wall Street firms raised their targets, including Morgan Stanley, Goldman Sachs, Wells Fargo, JPMorgan Chase, Citigroup, Bank of America, Stifel, Barclays, and Piper Sandler, to call a couple of.

Meta had a price goal of $550, but that can move higher after Thursday’s upgrades.

Meta stock has been on fire, nevertheless it remains to be trading at only 24 times earnings, so it still has loads of room to run. Investors must be taking a look at this Magnificent Seven stock as a long-term buy and hold.