Q3 was … a peculiar one for Meta, to say the least.
The company’s net Q3 income was $2.71 billion – an 83% YOY decrease.
No, it won’t be declaring bankruptcy by 2026. The stark statistic is the result of a one-time charge of $15.93 billion, related to the recent implementation of the One Big Beautiful Bill Act.
Without this charge, Meta would have seen a $2.71 billion YOY increase in net income, rather than a nearly $13 billion decrease.
Win some, lose some
A significant part of Meta’s (would-be) growth came from serving more ads and charging more for those ads. Revenue rose 26% YOY to $51.24 billion.
Price per ad went up 10% YOY due to increased demand from advertisers, CTO Susan Li told investors during Wednesday’s Q3 earnings call.
“This was partially offset by impression growth, particularly from lower monetizing regions and services,” Li said. Ad impressions increased 14% YOY, while the number of people who used a Meta app every day ticked up 8% YOY.
Meta is continuing to roll out Lattice, a unified model launched in 2023 to predict ad performance. The AI model now ranks about 100 fewer ads in recommendation models than it did at the time of its launch, homing in on the ones that drive the best performance.
Meta attributes Lattice’s success to the consolidation of smaller, more specialized models into a larger model with more generalized learnings. After rolling out Lattice to app ads in Q3, said Li, Meta saw a nearly 3% increase in conversions.
The dawn of (superhu)man
It’s no surprise that AI was a hot topic throughout the call. Zuckerberg repeatedly alluded to superintelligence – AI that can surpass the cognitive capabilities of a human – just as he did last quarter, noting that his ultimate goal is “personal superintelligence for everyone.”
The timeline could be anywhere from a couple of years down the line to a decade, but Meta’s perspective is to “aggressively front-load” the development process, Zuckerberg said, so that if the advent is on the sooner end, the company will be “ideally positioned for a generational paradigm shift and many large opportunities.”
Zuckerberg didn’t elaborate on what those opportunities might be.
But for a company so focused on AI, Meta has done something almost unprecedented: increased its headcount. Someone call the press! (Oh, wait …)
The company ended Q3 with over 78,400 employees, an 8% increase YOY. Most of the new hires were ad technical talent or, you guessed it, AI talent.
Trouble in paradise
Still, Meta’s leadership was hesitant to promise that next quarter would be equally strong. Li seemed skeptical that Meta’s agreement with the European Commission to include an option for less personalized ads would last.
“We cannot rule out the commission imposing further changes to that offering that could have a significant negative impact on our European revenue as early as this quarter,” she said.
And, of course, you can’t talk about Meta’s Q3 without talking about the trouble it’s gotten into regarding underage users’ engagement with chatbots – or, as Li diplomatically put it, “a number of youth-related trials.”
The child safety trials are scheduled for next year, she said, and “may ultimately result in a material loss.”
