Facebook’s parent company Meta reported an annual 16 per cent surge in second-quarter net profit, driven by an increase in user numbers and a surge in advertising impressions across its family of apps.
The California-based company earned a net profit of nearly $7.8 billion in the quarter that ended on June 30. It was 36.4 per cent more compared to the quarter that ended on March 31.
The social media company’s second-quarter revenue surged an annual 11 per cent to $32 billion, exceeding analysts’ estimates of $31.12 billion. It was nearly 12 per cent up on a quarterly basis.
This is the first time the company has reported double-digit revenue growth since the last quarter of 2021.
In the April-June period, advert impressions delivered across Meta’s family of apps increased 34 per cent on an annual basis while the average price for an ad decreased 16 per cent year on year.
Meta’s family of apps includes Facebook, Instagram, Messenger, WhatsApp and other services.
“Meta’s sales growth accelerated amid signs of better conditions in the digital advertising market,” Jesse Cohen, senior analyst at Investing.com, told The National.
“Meta’s solid quarter adds further evidence to the view that advertisers are choosing to spend their budget on the so-called market leaders, such as Facebook and Instagram.
"Investors have been encouraged by aggressive cost-cutting initiatives implemented by CEO Mark Zuckerberg in recent months."
Meta's shares jumped 1.4 per cent to $298.57 at market close on Wednesday and gained almost 7 per cent in after-hours trading.
The stock has gained nearly 140 per cent so far this year and the company had a market value of about $765.15 billion at the close on Wednesday.
The company’s earnings a share jumped 21 per cent annually to $2.98 in the last quarter.
“We had a good quarter,” said Mr Zuckerberg, also Meta’s founder.
"We continue to see strong engagement across our apps and we have the most exciting road map I have seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall."
Meta, which employs 71,469 people, expects its September quarter total sales to be in the range of $32 billion to $34.5 billion.
The number of Facebook’s daily active users, which declined for the first time in the company’s 19-year history in the fourth quarter of 2021, jumped 5 per cent yearly in the last quarter.
It reached 2.06 billion, exceeding StreetAccount’s estimates of 2.04 billion. Meanwhile, Facebook’s monthly active users rose 3 per cent on an annual basis to 3.03 billion as of June 30.
The company incurred an expense of $22.6 billion, up 10 per cent on an annual basis in the last quarter. This also included legal expenses of $1.87 billion and restructuring charges of $780 million.
As part of its restructuring efforts in March, Meta announced it would lay off 10,000 employees and close about 5,000 open roles.
In November, the company laid off 11,000 employees – equal to 13 per cent of its workforce.
The company's advertising sales contributed more than 98 per cent to overall sales in the second quarter, growing by about 12 per cent on an annual basis to almost $31.5 billion in the June quarter.
Revenue from other streams – including reality labs – dropped more than 25 per cent on an annual basis to nearly $501 million.
The company’s reality labs, which include augmented and virtual reality-related consumer hardware, software and content for the metaverse, also reported an operating loss, of more than $3.7 billion.
Meta’s chief financial officer Susan Li said operating losses in the reality labs division is expected to increase this year.
The company said it expects 2023's total expenses to be in the range of $88 billion to $91 billion, updated from its prior outlook provided in April.
Some of the expense drivers include AI and metaverse, the company said.
This is also increased due to legal-related expenses recorded in the last quarter, Ms Li said.
It also included about $4 billion of restructuring costs related to facilities consolidation charges and severance and other personnel costs.
The platform's capital expenditures are expected to be in the range of $27 billion to $30 billion for the 2023 full financial year, lowered from the prior estimate of between $30 billion and $33 billion.
“The reduced forecast is due to both cost savings, particularly on non-AI servers, as well as shifts in capital expenditures into 2024 from delays in projects and equipment deliveries, rather than a reduction in overall investment plans,” Ms Li said.
The company repurchased $793 million of its common stock in the last quarter. As of June 30, it had $40.91 billion available and authorised for repurchases, Meta said.
Facebook’s cash, cash equivalents and marketable securities stood at $53.45 billion at the end of the last quarter.
This month, Meta launched Threads, a text-based conversation app. It marks the company’s highest-profile attempt so far to challenge the primacy of rival social media platform Twitter.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Russia's Muslim Heartlands
Dominic Rubin, Oxford
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More from Rashmee Roshan Lall
Results
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5.30pm: Handicap (PA) Dh80,000 (T) 1,600m. Winner: Dassan Da, Patrick Cosgrave, Helal Al Alawi
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The bio
His favourite book - 1984 by George Orwell
His favourite quote - 'If you think education is expensive, try ignorance' by Derek Bok, Former President of Harvard
Favourite place to travel to - Peloponnese, Southern Greece
Favourite movie - The Last Emperor
Favourite personality from history - Alexander the Great
Role Model - My father, Yiannis Davos
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Ajax v Dynamo Kiev
Second leg: Tuesday, August 28, 11pm (UAE)
Dynamo Kiev v Ajax
