Meta profits more than double as Amazon investors hope for AWS growth

Meta Platforms followed-up bumper results from US tech giant peers Microsoft and Alphabet, with profits more than doubling in the third quarter.

The social media giant announced last night it raked in profits of £9.6billion for the three months to September, an increase of 164 per cent and smashing analyst forecasts of £7.7billion.

Meta, which also owns Instagram and Whatsapp, has suffered as advertisers cut budgets in the face of economic uncertainty and high interest rates. 

But advertising revenue in the quarter jumped to £27.8billion, up from £22.5billion last year, suggesting that ad market recovery remains on track.

Costs and expenses, which had been keenly watched by investors, were £16.8billion, a 7 per cent drop on last year.

And Meta trimmed its total expenses expectations for the year to between £71.8billion and £73.5billion from its previous forecast of £72.7billion to £75.1billion.

Boss Mark Zuckerberg laid out plans for a ‘year of efficiency’ in February, axing underperforming projects and cutting as many as 21,000 jobs.

This week’s tech earnings is expected to have a major impact on US markets 

But Meta shares sank in after hours training after the group warned of an expected softening of advertising in the final quarter of 2023 as a result of volatility, which is heightened by the Middle East conflict.    

Ben Barringer, technology analyst at Quilter Cheviot, said: ‘Otherwise, it was generally a good set of numbers from Meta delivering 21 per cent sales growth, 3 per cent 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 100m users.

‘There was a wide gap in forward guidance on growth at 13 to 24 per cent, indicating the more uncertain picture ahead. However cost and capital expenditure guidance are better than expected which will help profitability.

‘While Meta is outperforming its competitors, it seems there is no escape from the macro environment and the conflict in the Middle East and we wait to see how substantially it impacts its numbers in Q4.’

Amazon investors hope for AWS growth as tech giants post mixed results 

Later on Thursday Amazon is expected to continue its bounceback from last year’s losses, with sales of between $138billion and $143billion and investors hoping for growth in its online stores and Amazon Web Services cloud operation.

It is the latest to report in a busy week for tech investors after Microsoft posted profit growth of 27 per cent to £18.3billion on revenues of £46.5billion. 

Google parent company Alphabet, meanwhile, reported earnings growth of 40 per cent to £16.1billion on sales of £62billion.

But Alphabet slid 9 per cent to a three-month low at the open on Wednesday, as its cloud business recorded its slowest growth in almost a year.

Microsoft, by contrast, jumped 2.6 per cent to a three-month high after topping expectations across the business, including its cloud unit.

US tech giants took a hit last year as rising interest rates bludgeoned investor appetite, but confidence that the hiking cycle is reaching its peak is breathing fresh interest in the stocks.

This year has also seen huge expenditure on AI across the sector, which is betting the technology will be the major driver of returns in the years ahead. Investors, meanwhile, are keen to see businesses keeping a lid on rising costs.

Head of investment at Interactive Investor, which this week is waiving its £3.99 per trade fees on US stocks for UK investors, Victoria Scholar said: ‘The US is home to many tech behemoths and has proven to be an important source of growth for investors.

‘The heavy weighting towards tech stocks in the Nasdaq 100 and the S&P 500 means that the slew of earnings is likely to have a significant impact on US markets more broadly.

‘Typically, earnings season provides a bout of volatility for markets with much higher-than-normal gains and losses as traders and investors digest these quarterly scorecards.

‘After the 2022 “tech wreck” when stocks in the sector were heavily punished by rising interest rates and elevated inflation, the tech giants have been rebounding impressively in 2023, although gains have started to taper off since the summer raising concerns that the rally is running out of steam.

‘This earnings season will provide important insights into whether tech stocks have more room to run.’

Having lost more than 70 per cent over a disastrous 2022, Meta shares have bounced back strongly.

Amazon shares by contrast have had an ‘underwhelming quarter’ and remain short of their 2021 peak

Amazon has had an ‘underwhelming quarter’, chief market analyst at CMC Markets UK Michael Hewson said, despite hitting a one-year high in September.

The group’s 11 per cent revenue growth to $134.4billion in the previous quarter was driven by strength in its online stores and AWS.

Hewson said: ‘Over the past 12 months Amazon has been cutting headcount after over hiring during covid and said that 5,000 jobs had been cut during Q2.

‘Investors will be looking for revenue growth in both online stores as well as AWS which is expected to see revenues increase to $23.2billion.

‘Recent numbers would appear to suggest that Amazon has managed to bounce back from a disappointing 2022 when it reported significant losses, prompting significant cost cutting measures as well as headcount reduction.

‘Looking ahead to Q4, Amazon is likely to face challenges from a consumer slowdown, while the business is also looking to the future having invested up to $4billion in AI startup Anthropic.’

Amazon shares are up nearly 50 per cent since the start of 2023 to $128.56 but have added just 6 per cent over 12 months, having taken a hefty knock from disappointing results this time last year. They remain well short of their 2021 peak of $183.83.

This post first appeared on Dailymail.co.uk