Meta Platforms Inc (NASDAQ: META) Surges on Stellar Q2 Earnings Beat – What’s Driving the Magnificent Seven Stock?
Meta Platforms Inc (NASDAQ: META) stock skyrocketed higher after reporting second quarter earnings that blew past analyst expectations. The company generated a record-breaking $39.1 billion in revenue, a 22% increase year-over-year, smashing estimates. Net income also soared 73% to $13.5 billion, or $5.16 per share, crushing analyst predictions.
With Meta stock up 48% year-to-date and 64% over the past 12 months, it’s one of the top performers among the Magnificent Seven stocks, trailing only NVIDIA (NASDAQ: NVDA).
Operating margin expanded to an impressive 38%, driven by strong performance across key metrics. Daily active people on Meta’s platforms increased by 7% in the June quarter, reaching an average of 3.3 billion per day. CEO Mark Zuckerberg highlighted advancements in attracting users aged 18 to 29 and the rapid growth of Threads, the company’s latest social media platform with nearly 200 million monthly users.
Advertising revenue, Meta’s primary income source, surged 22% year-over-year to $38.3 billion, with ad impressions and average ad prices both climbing 10%. Additionally, the Reality Labs virtual reality Metaverse business saw a 28% revenue increase to $353 million.
Meta’s heavy investment in AI continues to be a key growth driver. Zuckerberg emphasized the role of AI in advertising, predicting that advertisers will soon be able to outline their objectives and budgets, leaving the rest to Meta’s algorithms. The company is also expanding its AI capabilities in various areas, such as Meta AI assistant and AI Studios for user-generated AIs.
Looking ahead, Meta raised its full-year capital expenditure forecast to $37 billion to $40 billion, with a focus on AI research and product development. The company anticipates third-quarter revenue between $38.5 billion and $41 billion, with full-year expenses projected at $96 billion to $99 billion, primarily allocated to AI and product development.
Following the strong earnings report, Meta received multiple price target upgrades from major Wall Street firms, indicating bullish sentiment. Despite its impressive performance, Meta stock is still trading at a reasonable valuation of 24 times earnings, making it an attractive long-term investment opportunity.
In conclusion, Meta Platforms Inc’s exceptional earnings, robust growth in advertising and users, and substantial investments in AI position it as a top contender in the tech industry. Investors should consider Meta stock as a compelling buy-and-hold opportunity for long-term wealth accumulation.