Facebook parent company Meta Platforms Inc. said today that it was able to grow its revenue by 3% during the first quarter of the year, reversing a trend that saw it deliver three straight quarters of sales declines and prompting investors to bid the stock up almost 15% Thursday.

Investors nodded in appreciation as the results easily surpassed Wall Street analyst’s expectations, sending Meta’s stock up more than 11% in extended trading. Meta’s stock has steadily made gains this year since Chief Executive Mark Zuckerberg (pictured) announced that 2023 would be a “year of efficiency” for the company.

Meta reported revenue of $28.65 billion, easily beating the consensus estimate of $27.66 billion. Earnings before certain costs such as stock compensation came to $2.20 per share, also beating Wall Street’s target of $2.02.

Zuckerberg also revealed strong user growth, saying that the number of monthly active users on Meta’s family of applications rose 5% during the quarter. Moreover, Facebook’s daily active users increased 4%, to more than 2 billion.

“We had a good quarter and our community continues to grow,” Zuckerberg said. “We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision.”

Meta still has room for improvement, though, as the company’s overall profit fell by almost 25% from the same period a year earlier, to just $5.7 billion.

The company, which also owns Instagram and WhatsApp, has stumbled over the past year as it attempts to pivot away from social media to focus on new areas such as the metaverse. Zuckerberg is a big believer in the potential of virtual reality-based digital worlds, but the metaverse road has proven to be a rocky one. To date, the company has thrown billions of dollars at the development of immersive, 3D worlds with little to show for it.

Investors have become increasingly worried about Zuckerberg’s metaverse obsession, and the CEO seems to have recognized that. In recent months, Meta has pivoted more toward artificial intelligence, which is an area that’s full of buzz right now following the rise of tools like OpenAI LP’s ChatGPT.

“Our AI work is driving good results across our apps and business,” Zuckerberg told analysts. He explained on a conference call that the company’s recent AI initiatives include an effort to build enhanced chat experiences in Messenger and WhatsApp, and visual creation tools for Facebook and Instagram users, as well as advertisers.

That last point is relevant because AI tools could help reverse an alarming trend that has seen advertising spend decline amid a weakening economy and shifts in consumer behavior. With memories of COVID-19 quickly fading, people are spending much less time online. What’s more, they have less disposable income than before. As a result, ad prices have fallen more than 17% in the last year, Meta reported.

The company has looked to address its falling ad revenues by announcing two rounds of mass layoffs in the last six months, with the most recent one coming in March. The job cuts are expected to shrink Meta’s total headcount by around a quarter, the company said previously.

Meta took a hit of more than $1 billion related to these restructuring plans in the March quarter, and said it will realize additional charges of around $500 million related to 2023 layoffs by the end of the year.

The revenue turnaround suggests that Meta’s traditional business has recovered somewhat, said analyst Charles King of Pund-IT Inc. “Combined with the savings accrued from laying off more than 20,000 workers, the company is back in the black,” he added. “Considering how badly Meta’s shares have performed over the past year or so, investors and shareholders have to be breathing sighs of relief.”

The savings from those layoffs will enable Meta to get back on track with regards to its growth targets, and the company had good news on that note when it revealed its guidance for the coming quarter. Officials said Meta is guiding for revenue of between $29.5 billion and $32 billion in the second quarter, ahead of Wall Street’s $29.5 billion consensus estimate.

Although AI was the focus of much of Meta’s conference call, very little was said about its ongoing metaverse efforts. That’s probably just as well. Reality Labs, the business unit responsible for developing Meta’s metaverse products, reported much lower-than-expected revenue of just $339 million, way below the $613.1 million analyst forecast. Altogether, the unit reported an operating loss of $3.99 billion, higher than the $3.8 billion estimate.

King said he wasn’t surprised that Meta shied away from discussing the metaverse, as Reality Labs seems unable to generate any significant interest or traction among users. “It must be galling for Zuckerberg and company to see Microsoft and its $10 billion-plus investment in OpenAI get so much positive attention and media coverage, considering that’s only a fraction of the amount Meta has plowed into its metaverse projects,” he said.

Constellation Research Inc. analyst Holger Mueller said Meta’s bets on the metaverse and AI are part of a plan by the company to transition away from its existing business model based on ad sales. “To do this, Zuckerberg needs to work and deliver on two separate fronts,” Mueller explained. “So far, the metaverse results have not been great, so investors will be looking to see an improvement there. The good news is that the old business model is still holding up strong.”

Image: Anthony Quintano/Flickr