Tech giant Meta’s advertising business is roaring back, as the parent of Facebook and Instagram exceeded Wall Street’s third-quarter 2023 earnings forecasts.

Meta reported Q3 revenue of $34.15 billion, up 23%, and net income more than doubling to $11.58 billion (or $4.39 per share). The results come after the company suffered year-over-year revenue declines in the last nine months of 2022, leading CEO Mark Zuckerberg to slash more than 21,000 jobs.

“We’re a leaner organization,” Zuckerberg said on the Q3 earnings call, noting that its 40% operating margin in the quarter was a two-year high. In prepared remarks, he said, “We had a good quarter for our community and business. I’m proud of the work our teams have done to advance AI and mixed reality with the launch of Quest 3, Ray-Ban Meta smart glasses and our AI studio.”

Wall Street analyst consensus estimates for Q3 were for revenue of $33.56 billion and EPS of $3.63, according to data provider Refinitiv.

Meta issued bullish revenue guidance for the fourth quarter of 2023, pegging sales to be in the range of $36.5 billion-$40 billion (compared with $32.17 billion in the year-earlier period). CFO Susan Li said the company provided a comparatively wide range for the forecast, citing a “volatile environment” with the Israel-Hamas war that could dampen advertising demand.

Zuckerberg, the company’s controlling shareholder, continues to plow cash from Meta’s core social apps into its money-losing Reality Labs AR/VR division, whose products include the recently launched Oculus 3 headset.

For Q3, Reality Labs generated $210 million in revenue (down 26%) and an operating loss of $3.74 billion (up 2%). In 2024, Meta said it expects Reality Labs operating losses to “increase meaningfully year-over-year” as it invests in product development. The company said consumers to date have spent more than $2 billion games and apps in the Quest store.

In part because of the investment in Reality Labs, Meta expects expenses to increase from $87 billion-$89 billion this year to $94 billion-$99 billion in 2024. Two other contributing factors: higher infrastructure-related costs and higher payroll expenses “as we work down our current hiring underrun and add incremental talent to support priority areas in 2024, which we expect will continue to shift our workforce composition toward higher-cost technical roles,” the company said in the earnings announcement. On the call, Zuckerberg said Meta will “continue deprioritizing non-AI projects” in its hiring.

Meta’s social-networking services continue to grow — but at lower rates, given its already-massive reach. Facebook’s daily active users averaged 2.09 billion in September 2023, up 5% from a year earlier (and versus 2.06 billion in June). Total DAUs across Meta’s family of apps (Facebook, Instagram, WhatsApp and Messenger) reached an average of 3.14 billion, an annual increase of 7% and up from 3.07 billion three months prior.

Reels, the short-form video format on Instagram and Facebook that mimics TikTok, has represented more than 40% of time spent on Instagram since it was launched, Zuckerberg said on the call. He said Reels is now “net neutral” to overall company revenue, meaning it’s generating ad revenue commensurate with other areas of the Meta apps.

Zuckerberg said Threads, Meta’s Twitter-like service it launched three months ago, has just under 100 million monthly active users at this point.

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Separately, on Tuesday Meta was sued by state attorneys general in 41 states and the District of Columbia, alleging the social giant’s Instagram and Facebook apps were designed to “purposefully addict children and teens,” to the detriment of their mental health. In response, a Meta rep said in part, “We’re disappointed that instead of working productively with companies across the industry to create clear, age-appropriate standards for the many apps teens use, the attorneys general have chosen this path.”

With respect to the Israel-Hamas war, the European Union earlier this month put Meta on notice about the urgent need to address misinformation about the conflict to remain in compliance with the EU’s Digital Services Act.

Meta responded that it had taken a number of steps to comply with local laws and limit the spread of misinformation, such as establishing a special operations center staffed with experts, including those fluent in Hebrew and Arabic, “to closely monitor and respond to this rapidly evolving situation.”