What’s going on?
Meta released better-than-expected third-quarter results late on Wednesday, and Zuckerberg won’t be the only one smiling.
What does this mean?
After many extravagant years, Meta’s cost-cutting was always going to be more drastic than your average American’s budgeting session. But by announcing that this year’s expenses will land between $87 and $89 billion, the tech giant trimmed a couple of billion off its previous projections. That was impressive by itself, but then Meta announced that it made 23% more revenue last quarter than the same time last year – better than analysts expected. A quick mental math equation tells you that profit, then, flew past expectations too, a very welcome relief for investors nursing nerves that’ve been frayed by sagging tech stocks recently.
Why should I care?
Zooming out: Head in the clouds, feet on the ground.
Big Tech investors tend to have their heads in the clouds. Literally: they’re drawn to major companies with successful cloud divisions. But advertising sectors are worth an eyeball or two, as well. Ads still dominate Meta and Alphabet’s revenue streams, plus the amount of money funneling into online ads is a reflection of the overall economy’s health. So with Meta more than doubling Alphabet’s 11% bump in advertising revenue, those heady results could be a strong sign that the economy’s gaining strength.
For markets: Time to test the mettle.
Tech stocks used to follow the market’s movements to extremes, often outperforming others during better days and sinking more than most when the tide turned. But the explosion of software products and services brought along reliable subscription-style revenue streams, along with bulletproof balance sheets, which means investors now view Big Tech as a shelter during even the roughest storms. Major tech companies have yet to test this theory against an all-out recession, of course, but they may get the chance very soon.
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Originally Posted October 25, 2023 – A Laughing Meta
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