Shares of Meta dipped more than 2% Thursday, a day after the company released strong third-quarter results but offered cautious comments about potential ad softness due to the ongoing Israel-Hamas war.
Meta reported $34.15 billion in revenue for the quarter, up 23%, and the fastest rate of growth since 2021. The company’s net income jumped 164% to $11.58 billion, or $4.39 a share. Both revenue and earnings surpassed Wall Street’s expectations, marking a welcome change for investors after the company’s core digital ads business dropped for three straight quarters in 2022.
Shares of Meta initially rose after the report but the gains were erased when Meta’s finance chief Susan Li warned analysts about unpredictability in the Middle East. As a result of the conflict in Israel, Meta gave fourth-quarter guidance between $36.5 billion to $40 billion. The range is wider than the $2.5 billion gap the company typically offers.
“We have observed softer ads in the beginning of the fourth quarter, correlating with the start of the conflict, which is captured in our Q4 revenue outlook,” Li said during the call with analysts.
Meta Platforms CEO Mark Zuckerberg speaks about the Facebook News feature at the Paley Center For Media in New York on Oct. 25, 2019.
Drew Angerer | Getty Images News | Getty Images
But despite the uncertainty around the war, many analysts remain optimistic about Meta’s performance.
Evercore analysts said “the BIG negative” from the call was that brand advertising demand has slowed as a result of the war. They note that Snap offered similar commentary in its recent earnings call, and said it is not unlike the advertising pause that took place after war broke out in Ukraine.
“We believe ad demand has already begun to recover at Meta,” they said in a note Wednesday, adding that they “believe near-term ad market demand will be more volatile than usual.”
Despite the slowing brand advertising demand, the Evercore analysts said a lot is “working” at Meta. They said AI is driving engagement, and the company’s “year of efficiency” mantra is extending into years of efficiency.
Analysts at Morgan Stanley said, while Meta has seen some pause in branded advertising, they believe the company has been less impacted than others. They said Meta’s AI investments and its increasing engagement on Reels remind them of when the company was first growing its Facebook and Instagram platforms.
“While all advertising may be impacted by geopolitical activity, advertising allocation remains a relative game and we believe META’s differentiation gap is widening vs most peers,” the analysts wrote in a Thursday note.
Analysts at Deutsche Bank said they think the fundamentals of Meta’s business “remain best-in-class,” and can withstand the impact of the conflict. They added that Meta’s pipeline is “rich with products” like its X competitor Threads and other AI tools that could contribute to engagement and revenue.
“As such, we have growing conviction in the thesis of durable top-line growth at Meta despite near term volatility related to geopolitical uncertainty,” they wrote in a Thursday note.
Chinese tech company Tencent is a gaming giant and the parent company of WeChat, the ubiquitous social messaging app in China.
Cheng Xin | Getty Images News | Getty Images
Chinese social media and gaming company Tencent on Wednesday reported better-than-expected profit in the third quarter, spurred by growth in games, advertising and cloud services.
Tencent reported profit attributable to shareholders of 53.23 billion yuan ($7.37 billion) in the third quarter, compared with a LSEG estimate of 46.18 billion yuan over the period.
The company’s revenue came in at 167.19 billion yuan, short of the 167.82 billion yuan analyst forecast.
The West shouldn’t assume that China is lagging behind the U.S. and Europe on tech developments, Microsoft’s president and vice-chairman warned.
U.S-China tensions in the past few years have centered on the battle between the two nations for tech supremacy, culminating in a slew of export controls on critical technologies. Late last year, China’s Huawei surprised the market with the release of a smartphone whose reviews indicated downloads speeds associated with 5G, sparking speculation of an apparent chip breakthrough that defied U.S. tech sanctions.
Speaking at the Web Summit tech conference in Lisbon, Portugal, on Tuesday, Microsoft’s Brad Smith told CNBC that “in many ways,” China is close to or is even catching up on technology.
“I think one of the dangers, frankly, is that people who don’t go to China too often assume that they’re behind,” he told CNBC’s Karen Tso. “But when you go there, you’re impressed by how much they’re doing.”
He predicted that Chinese and American companies will be competing on technology into the distant future and urged U.S. and European companies to collaborate to grow economies and bring new advancements like artificial intelligence to the rest of the world.
Microsoft CEO Brad Smith participates in a meeting at The Westin Palace Hotel, on 20 May, 2022 in Madrid, Spain.
Cezaro De Luca | Europa Press | Getty Images
Microsoft has operated in China since 1992, according to the company’s web page, including through its largest research and development center outside the U.S. Microsoft CEO Satya Nadella said last year that the firm wasn’t focused on China as a domestic market, but that it provides services to Chinese companies and has a more visible presence locally than do many other U.S. tech giants.
Asked about whether trade and tech transfers — or the movement of data, designs or innovations — with China will get more challenging as Washington transitions between the administrations of U.S. incumbent leader Joe Biden and President-elect Donald Trump, Smith it was too early tor know.
“The truth is, as an American technology company, we can do business in China only when we are offering a service that the Chinese government wants to have there, and the U.S. government wants us to bring there,” he said, adding, “And in some cases they look at, say, a data center to support a Mercedes or a Siemens or a Starbucks or a General Motors — there seems to be a level of comfort. In consumer services, not really.”
He predicted that we’ll live in a world where some technology will move to China, and it won’t be the tech firms that decide.
Vasco Pedro, co-founder and CEO of Unbabel, on the first day of the 2023 Web Summit at the Altice Arena in Lisbon.
Miguel Reis | SOPA | Lightrocket | Getty Images
LISBON — Unbabel on Wednesday announced a translation service powered by artificial intelligence, adding another rival to a highly competitive space — with its CEO warning that humans may not be needed for translation at all in three years.
Widn.AI is Unbabel’s new product and is based on the company’s proprietary large language model (LLM) called Tower. An LLM is an AI model that underpins applications like OpenAI’s ChatGPT.
Unbabel’s LLM allows AI translation in 32 languages, Vasco Pedro, the company’s CEO, told CNBC in an interview at the Web Summit in Lisbon.
“When we started in Unbabel 10 years ago, AI was not at the stage that it is now, and so we were very much focused on creating hybrid solutions that would combine AI and human,” Pedro said.
“But I think for the first time, we believe that translation is now fully in the realm of AI capabilities, and that you can do a lot of things without needing humans at all in the case of translation.”
Unbabel’s traditional product was one that combined so-called machine learning, a type of AI, to translate words, but with human editors to check the final product.
Pedro said Widn.AI will not require humans.
“I think humans still have a slight advantage in very hard use cases. But that advantage right now is so razor thin that except for really the … most difficult use cases, we believe AI is getting really there, and it’s hard for me to see right now how three years from now, you will need humans to be translating anything,” Pedro said.
“There’s still going to be humans responsible for making sure that things get translated and are delivered in the right places,” he added.
Widn.AI is the latest product in an increasingly competitive market which includes Google Translate and products from German startup DeepL.
Those companies see translation as a key area in which LLMs can be used effectively and have trained models specifically to tackle various languages.
Pedro acknowledges that the revenue per translated word is going to “drastically reduce.” But he said there will be an increase in the amount of content translated which will sustain the company’s growth.
Unbabel is speaking to investors and is looking to raise between $20 million and $50 million in funding to fuel the growth and development of Widn.AI, according to Pedro.