Can Higher Ad Revenues Boost Meta Platforms Q4 Earnings?

Meta Stock

As Meta Platforms (NASDAQ:META) gears up to announce its fourth-quarter 2023 results on Feb 1, expectations are high for the company to showcase the advantages of increased advertising revenues.

In the same quarter, Meta’s primary competitor for ad spending, Alphabet (GOOGL), reported robust results for Q4 2023. Google advertising, a division of Alphabet, reported revenues of $65.52 billion, demonstrating an 11% year-over-year increase in the fourth quarter of 2023, propelled by robust growth in the retail sector.

It is anticipated that Meta Platforms will benefit from robust demand from advertisers. The Zacks Consensus Estimate for its fourth-quarter advertising revenues stands at $37.88 billion, indicating a substantial 21.2% year-over-year growth.

In Q3 2023, advertising revenues, constituting 99.1% of Family of Apps revenues, witnessed a noteworthy 23.5% year-over-year increase, reaching $33.64 billion and accounting for 98.5% of total revenues.

Meta Platforms has strategically focused on enhancing ad ranking and measurement through AI, acting as a crucial catalyst in boosting advertisers’ return on investment. The Zacks Consensus Estimate for advertising revenues in the Asia-Pacific region is projected at $7.22 billion, indicating a 21% growth in the fourth quarter of 2023.

For Europe, the United States, Canada, and the Rest of the World, the consensus estimates for advertising revenues are $8.82 billion, $17.51 billion, and $680 million, reflecting growth rates of 27.8%, 16.7%, and 5.8%, respectively.

Reels Driving Growth

As a company currently holding a Zacks Rank #2 (Buy), Meta Platforms is expected to benefit from the rising popularity of Instagram in international markets, particularly in Asia. The surge in popularity is attributed to the widespread adoption of short-form videos, specifically Reels on Instagram.

Reels, contributing to the platform’s growth, have attracted the Gen-Z demographic amid competition from other platforms like Snapchat, Twitter, and TikTok. AI-driven improvements in recommendations have resulted in a more than 40% increase in time spent on Instagram.

The growth of Threads has also been noteworthy for Meta Platforms, as the company focuses on retaining users, leading to an expected boost in user growth. The company has been actively expanding video monetization, especially in short-form videos like Reels, utilizing AI and machine learning.

Additionally, Meta Platforms has demonstrated a commitment to prioritizing user safety and well-being through initiatives aimed at enhancing parental supervision, messaging privacy, and time management on its platforms. These efforts are anticipated to contribute to user base growth in the fourth quarter of 2023.

Estimates and Outlook

The Zacks Consensus Estimate for Meta Platforms’ fourth-quarter earnings stands at $4.83 per share, reflecting a 1.04% increase over the past 30 days and suggesting a robust 61% year-over-year growth.

Anticipating total revenues in the range of $36.5 billion to $40 billion for the fourth quarter of 2023, Meta Platforms is expected to benefit from favorable forex, contributing to an approximate 2% year-over-year growth in top-line figures.

The consensus estimate for fourth-quarter revenues currently stands at $38.99 billion, indicating a substantial 21.23% growth compared to the figure reported in the year-ago quarter.

Featured Image: Unsplash

Please See Disclaimer