Middle East Unrest Overshadowed Meta's And Snap's Strong Quarterly Results

Meta Platforms META and Snap Inc SNAP topped earnings estimates this week. Snap returned to revenue growth and Meta reported record profits and sales on digital ad strength. But, both social media companies warned about the conflict in the Middle East that already softened ads,

Meta’s Year Of Efficiency’ Turnaround Strategy Continues To Deliver

For the quarter ended on September 30th, Meta reported its revenue grew at the fastest rate since 2021, reaching $34.15 billion. What’s also impressive is that net income skyrocketed 164% to $11.58 billion, or $4.39 a share, with both top and bottom-line figures topping Wall Street estimates. Cost cuts also played a part in these results as expenses were lowered 7% YoY to $20.4 billion. Over the past year, Meta trimmed its workforce by a third and flattened its organizational structure as a result.

Although shares initially rose upon the report, gains were erased when Meta’s CFO Susan Li warned about the implications of the war in Israel and widened fourth quarter revenue guidance as a results as the beginning of the undergoing quarter has already experienced ad softening. Fourth quarter revenue is now expected in the range between $36.5 billion and $40 billion.

Snap Returned To Revenue Growth

On late Tuesday, Snap reported its first quarterly revenue rise this year as third quarter revenue rose 5%YoY. For the third quarter that ended on September 30th, Snap reported revenue of $1.19 billion and adjusted earnings of 2 cents per share, both topping FactSet’s expectations of $1.11 billion in sales and an adjusted loss of 4 cents. Although earnings do show that efforts to bring advertisers are working, Snap still needs to show more progress on the profitability front as it still posted a $368 million GAAP loss, widening last year comparable quarter’s GAAP loss of $360 million.

On a brighter note, CEO Evan Spiegel highlighted the positive growth by pointing out the major cost cutting efforts and noted that the company has observed faster growth for direct-response advertising which fueled users to buy the targeted product or download the desired app.

Snapchat ended the quarter with 406 million daily active users which implies to a 12% YoY rise., also topping FactSet’s projection of 405 million monthly active users as well as StreetAccount’s estimate of 405.7 million.  Average revenue per user amounted to $2.93, also topping StreetAccount’s estimate of $2.74.

Although no formal guidance was provided due to the war in the Middle East with some advertisers pausing their campaigns in response, Snap only provided an internal forecast for fourth quarter sales in the range between $1.32 billion to $1.38 billion.

Although some campaigns have already resumed, both Snap and the mighty Meta were cautious in their outlooks and in assessing the risk that these pauses could increase in magnitude. With the war in Ukraine and now in Israel, the world has undoubtedly been dragged into a new dark ag. Social media platforms, at the very least, could play the important role in their history by making sure the truth behind these atrocities is told so hopefully the rest of the world does not continue to turn a blind eye.

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