Geoffrey Seiler, The Motley Fool
5 min read
Meta Platforms (NASDAQ: META) stock looks like a buy after the social media company once again reported strong revenue growth and issued upbeat guidance. While the stock has rallied from its summer low following the introduction of its Muse AI agents, the stock is around breakeven on the year after a post-earnings sell-off.
Let’s dive into Meta’s results and prospects to see why the stock looks like a buy.
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Meta delivers 26% revenue growth in Q3
The biggest reason to own Meta stock is that it has been one of the best companies at using AI to drive growth in its core business. This was evident again in Q3, when revenue grew 26% to $64.6 billion, beating the $63.37 billion consensus, as compiled by LSEG.
Adjusted EPS, excluding a large legal settlement, came in at $7.40. That easily surpassed the $5.75 consensus.
Meta’s advertising revenue jumped 26% to $63.1 billion, while other revenue climbed 59% to $1.1 billion. Revenue at Reality Labs, which is home to its reality headsets and smart glasses, fell 6% year over year to $443 million.
Reality Labs continues to produce large losses, with operating income coming in at a loss of $4.1 billion. Excluding charges, Meta’s overall operating income would have risen 11%. The company said it is shifting its focus with Reality Labs toward personal superintelligence and incorporating Muse into its smart glasses while deemphasizing virtual reality investments
Meta’s advertising growth was led by a 14% rise in average ad price and a 10% increase in ad impressions. The growth continues to be driven by AI, with new predictive models and generative AI tools continuing to improve ad personalization and effectiveness. This is helping improve engagement and conversion rates.
Meanwhile, over 10 million people in just the U.S. and Canada have already been using the company’s new Muse AI agents since its launch a month and a half ago. About a quarter of users are interacting with the platform daily. Meta will initially monetize Muse through a combination of transaction fees and subscriptions for high-use plans. It also sees an eventual opportunity around paid usage and business services. It’s also building an enterprise product as well, where it said it wants to ” serve as much high-margin inference demand as possible.”
