Facebook-owner Meta Platforms (META:NASDAQ) reported a 23% increase in revenue for the quarter ended 30 September to $34.2 billion compared to $27.7 billion in the same year ago period, however it warned of softer advertising spend in the fourth quarter due to macro volatility and the Middle East conflict.

FACEBOOK USERS UP

Facebook daily active users were up 5% year-on-year to 2.09 billion on average for September 2023 and Facebook monthly active users were 3.05 billion as of September 2023 – an increase of 3% year-on-year.

However, Meta’s ad impressions and price per ad fell by 6% year-on-year in the third quarter.

Meta shares were down over 4% on the news to $299.53.

This fall is in stark contrast to its impressive year-to-date performance for Meta’s shares – a rise of over 140% - outperforming both the S&P 500 and Nasdaq indices.

Ben Barringer, technology analyst at Quilter Cheviot said: ‘Meta has seen a reversal in its share price this morning after an initial bounce following the release of its third quarter statement.

‘Otherwise, it was generally a good set of numbers from Meta delivering 21% sales growth, 3% ahead of expectations. This was driven by strong engagement and decent user growth amongst the Facebook family of apps, with Meta confirming its X competitor, Threads, has already reached 100 million users.

‘Meta is a bit AI beneficiary, with AI driving its ad platform in terms of better targeting and getting better return on investment for advertisers. It is rolling out tools that will help small businesses have better AI assistance, such as chat bots and AI-driven content creation. Meta has also seen 30 million downloads of its Llama 2 open-source large language AI model.'

YOUNG MENTAL HEALTH CRISIS

Prior to the release of third quarter results, 33 US states including California and New York announced they were suing Meta saying that Instagram is behind a mental health crisis among young people.

‘Meta has harnessed powerful and unprecedented technologies to entice, engage, and ultimately ensnare youth and teens,’ said complaint filed in an Oakland, California federal court.

GOOGLE THIRD QUARTER REVENUE UP BUT CLOUD FAILS

Elsewhere US tech giant rival Alphabet (GOOG:NASDAQ) reported a 11% rise in revenue for the quarter ended 30 September 2023 to $76.69 billion compared to $69.09 billion in the same year ago quarter ‘driven by meaningful growth in Search and YouTube’.

But Google’s Cloud business fell short of analysts’ expectations of $8.6 billion versus the actual figure of $8.4 billion for the quarter ended 30 September 2023.

Google shares fell over 9% on the news to $125, but year-to-date shares are up over 40%.

AJ Bell head of financial analysis Danni Hewson said: ‘The fall-out from a disappointing performance from Google-owner Alphabet’s cloud division continues as a wider tech sell-off feeds into the performance of European markets on Thursday.

‘When you consider the negative reaction to Meta Platforms’ warning of weaker ad spend, despite, like Alphabet, posting better-than-expected earnings, then hopes big US tech might continue to drag markets higher on its back are starting to look increasingly forlorn.

‘It is notable that, thanks to their extremely strong run, beating earnings expectations is not proving enough to support share prices. Investors are looking beyond the headlines to see just how healthy the outlook really is for these businesses.’

WPP CAUTIOUS ON ADVERTISING OUTLOOK

Across the pond, shares in advertising giant WPP (WPP) were down over 2% to 674p  as it reported a 1.8% fall in third quarter revenue to £3.5 billion but a 2.3% rise in like-for-like revenue.

WPP updated its full year 2023 guidance now expecting like-for-like revenue less pass-through costs growth to be around 0.5%-1% (previously 1.5-3%) with headline operating margin of 14.8-15% (excluding the impact of foreign exchange, previously 15%).

Mark Read CEO of WPP said: ‘Our top-line performance in the third quarter was below our expectations and continued to be impacted by the cautious spending trends we saw in the second quarter, particularly across technology clients with more impact from this felt in GroupM over the summer than the first half.’

On the upside WPP said it achieved ‘significant wins’ in the third quarter with Estée Lauder (media), Hyatt (creative), Lenovo (creative), Nestlé (media) and Verizon (creative).

‘Our net new business performance of $1.4bn in the quarter showed sequential improvement after a tougher first half,’ added Read.

Analyst Roddy Davidson at Shore Capital, however remained upbeat about WPP’s future, he said in a research note: ‘Looking beyond current conditions, we continue to view WPP’s as a well-managed and deeply resourced global player with an extensive blue chip client base and a focus on harnessing technology and AI provides – all of which suggests the potential for attractive long-term earnings per share (EPS) and dividend per share (DPS) growth and strong cash generation.’

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DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.

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