Shares of Meta Platforms Inc. gained more than 6% in after-hours trading today after the company posted solid earnings and revenue that exceeded analysts’ expectations and provided a strong forecast for the current quarter.

In its second-quarter financial results, Meta delivered earnings before certain costs such as stock compensation of $5.16 per share, crushing the analyst consensus estimate of $4.73, while revenue rose by an impressive 22%, to $39.07 billion. That was also well ahead of the analysts’ forecast, of $38.31 billion in sales.

All told, Meta delivered net income of $13.47 billion, up by an impressive 73% from a year earlier when its profit was less than $8 billion.

For the third quarter, Meta said it’s looking at revenue of $38.5 billion to $41 billion, which translates to $39.75 billion at the midpoint. That’s better than expected too, as Wall Street had earlier forecast Meta’s third-quarter sales at $39.1 billion.

The social media platforms giant once again showed impressive growth in its digital advertising business. Ad revenue, which is mostly derived from Meta’s Facebook and Instagram platforms, shot up by 22% from a year earlier – more impressive than Google LLC’s ad growth rate of just 11%, which was reported last week.

During the quarter, Meta had to spend $24.2 billion on expenses, including a $1.4 billion charge relating to its recent settlement with the state of Texas over a lawsuit about facial recognition data. Capital expenditures were reported at $8.47 billion, lower than the analyst forecast of $9.51 billion.

In a conference call, Meta officials said that the company’s expense outlook for the full fiscal year remains the same, at between $96 billion and $99 billion, but they narrowed the range regarding capital expenditures, which is now between $37 billion and $40 billion. Previously, the company had forecast a wider range of between $35 billion and $40 billion.

Meta got bigger during the quarter, with daily active people rising 7%, to 3.3 billion. Ad impressions increased by 10% from a year earlier, and ad prices jumped 10%. However, the company once more reduced its headcount, which fell 1% from a year earlier, to 70,799 as of June 30.

Investing.com analyst Thomas Monteiro said Meta looks like it’s well-placed to grow at a much faster clip than its rivals in both AI and advertising.

“That’s because [it] keeps showing signs that it is able to grow at the 20%-plus per quarter level in a much more efficient way than other big tech peers, such as Alphabet and Microsoft,” he said. He added that those rivals are “not only struggling to keep revenue growth in the double-digits, but also progressively taking a bigger hit on the margins side.”

Chief Executive Mark Zuckerberg (pictured) said in a statement that Meta’s significant investments in artificial intelligence infrastructure and research are also paying off, as is its focus on virtual reality technology.

“Meta AI is on track to be the most-used AI assistant in the world by the end of the year,” Zuckerberg said. “We’ve release the first frontier-level open-source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses and we’re driving good growth across our apps.”

On the conference call, Zuckerberg explained that the company is busy refining its plans for next year, and expects to see significant growth in its capital expenditures in 2025 as it funnels even more money into its AI research and product development efforts.

The Facebook founder said earlier this year that Meta will spend billions of dollars on building out its AI computing infrastructure, and plans to own 350,000 of Nvidia Corp.’s H100 graphics processing units by the end of 2024. Those GPUs are widely considered to be essential for training AI models, but they’re not the only thing in Meta’s AI arsenal, for it plans to have “almost 600,000 H100 equivalents of compute if you include other GPUs,” Zuckerberg said at the time.

Sonata Insights analyst Debra Aho Williamson told the Associated Press that those investments will cost the company billions of dollars. “The market’s positive response to Meta’s earnings report is a bellwether for AI stocks,” she said. “If a company can show strong results from its core business, its investments in AI will be seen more positively, but if the core business is showing any sign of weakness, as we saw last week with Alphabet’s YouTube, then the stock may seem more risky.”

Meta’s latest big achievement in AI was the release last week of a new version of its popular Llama large language model. The new Llama 3.1 release consisted of three variants, each of which is open-source and free for any developer to use. The largest of the three comes with 405 billion parameters, making it one of the largest-ever LLMs.

Meta’s stock had already gained an impressive 34% in the year to date, prior to today’s report, almost double the gains of the tech-heavy Nasdaq index.

Photo: Anthony Quintano/Flickr