After a turbulent 2022, Meta's investments in AI technology and its short-form video product, Reels, finally appear to be paying off, with the company's share price rocketing by 8% after a stronger-than-expected second quarter.
This financial period saw Meta's revenue grow by $32 billion, shattering Wall Street's growth estimates of $31.12 billion, and marking the company's first profitable quarter since 2021.
Meta's recent successes are largely attributed to a substantial boost in ad revenue following impressive engagement on Instagram Reels – a feat that commercial and potential cage fight rival, Elon Musk, is currently struggling to replicate.
Meta's AI Investments Are Drawing in Advertisers
Meta's recent investments in AI seem to be paying dividends, according to a second-quarter earnings call led by the company CEO Mark Zuckerburg.
After a grueling “year of efficiency” aimed at scaling back costs, Meta CEO Mark Zuckerburg revealed the companies raked in $32 billion during the second quarter – an impressive YoY increase of 11%.
“”We had a good quarter. We continue to see strong engagement across our apps and we have the most exciting roadmap I've seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline.” – Mark Zuckerburg, Meta CEO
Growth was recorded across most areas of the business, but Zuckerburg reported that AI-recommended posts from unfamiliar accounts have become the fastest-growing category on Facebook's feed, contributing to users spending 7% more time on the platform.
Instagram's Reel platform has seen major wins too. According to recent research from Emplifi, Reels outperformed every other content type in Q 2023 and generated 55% more interactions than single-image posts. Zuckerburg commented on the success of Instagram Reels the earnings call, revealing that platform has reached an annual run rate of $10 billion, up from $3 billion last October.
Meta's AI triumphs don't stop there, either. Just last week, Meta released Llama 2, a large language model that seeks to rival GPT-4. But as the pivot towards AI continues to reap rewards, what does this mean for the company's VR passion project, the Metaverse?
Artificial Intelligence In, Metaverse Out?
Meta's heavy investment into the Metaverse was a magnet for criticism throughout much of 2022.
But while the project may appear to have been placed on the back burner, Zuckerburg is adamant he's not scaling it back just yet. The CEO claims to be doubling down on Meta spending ahead of the release of Quest 3 – the company's most “powerful headset yet”
“We remain fully committed to the metaverse vision as well.” Zuckerberg pointed to the impending release of the company’s next generation virtual reality headset, Quest 3″ – Mark Zuckerburg, Meta CEO
However, Meta's ‘Reality Labs' was one of the only departments not to make a profit in the company's last earning call. And with a Meta exec already claiming that the “metaverse hype is dead” it's uncertain how long Zuckerburg can keep the dream alive for.