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Facebookparent company Meta’s return to revenue growth in the first quarter of 2023 as well as an optimistic second-quarter guidance led the company’s stock to surge 12% during after-hours trading on Wednesday.

In the quarter ended March 31, 2023, Meta’s revenue rose 3% to $28.6 billion, from $27.9 billion in the corresponding quarter last year. However, the company’s net profit in the first quarter fell 24% to $5.7 billion, from $7.5 billion in the year-ago period.

The social media company issued an optimistic outlook for the second quarter. The company said it expects second-quarter revenue to be around $29.5 billion to $32 billion. Its revenue in the corresponding year-ago period was $28.8 billion.

Commenting on the first quarter results, Mark Zuckerberg, Meta Founder and Chief Executive Officer (CEO), said, in a statement, “We had a good quarter and our community continues to grow.”

“Our AI work is driving good results across our apps and business. We are also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision,” he added.

Zuckerberg emphasised that the “two major technological waves” driving Meta’s roadmap are “a huge AI wave today” and “a building metaverse wave for the future”.

The company’s artificial intelligence (AI) efforts focus on two main areas—the recommendations and ranking infrastructure that power its main products and the new generative foundation models that enable new classes of products and experiences.

Since Meta launched Reels, AI recommendations have driven an over 24% increase in the time spent on Instagram, Zuckerberg said.

The company’s AI work is also improving monetisation. Its Reels monetisation efficiency is up over 30% on Instagram and over 40% on Facebook quarter-over-quarter, according to Meta’s chief.

Speaking about metaverse, Zuckerberg said, “A narrative has developed that we are somehow moving away from focusing on the metaverse vision, so I just want to say upfront that that’s not accurate.”

He added that the company will continue to focus on both AI and metaverse, and the two areas are related.

“Building the metaverse is a long-term project, but the rationale for it remains the same and we remain committed to it,” Zuckerberg noted. 

The company is getting ready to launch its next-generation consumer virtual and mixed-reality device later this year. Meta Quest 2, an all-in-one VR headset, was launched almost three years ago.

Facebook, which rebranded itself as Meta in 2021, is focused on bringing the metaverse, an immersive digital realm to life, and is making significant investments in this area.

The revenue of its Reality Labs, which has researchers, developers, and engineers working on virtual reality and augmented reality gadgets and its metaverse vision, was $339 million, down 51% year over year, due to lower Quest 2 sales.

Reality Labs’ expenses were $4.3 billion, up 18% primarily due to employee-related costs and restructuring charges, the firm said. The unit’s operating loss widened to $4 billion from $3 billion in the year-ago period.

“We continue to expect Reality Labs operating losses to increase year over year in 2023,” Susan Li, Chief Financial Officer of Meta said.

Last year, Meta initiated several measures to pursue greater efficiency and realign its business and strategic priorities. As of March 31, 2023, the company said it has substantially completed the 2022 employee layoffs. It has incurred additional pre-tax restructuring charges of $621 million in the first quarter of 2023.

Meta’s total restructuring charges recorded under its Family of Apps segment was $934 million and the Reality Labs segment was $210 million during the first quarter of 2023.

Its total costs and expenses in the first quarter, including charges related to its restructuring efforts, were $21.4 billion, an increase of 10% year over year. 

Last month, the social media firm announced three rounds of planned layoffs to further reduce its workforce by approximately 10,000 employees across the s Family of Apps and Reality Labs segments. In connection with these layoffs, Meta said it expects to incur total pre-tax severance and related personnel costs of approximately $1 billion by the end of 2023.

Meta’s headcount was 77,114 as of March 31, 2023, a decrease of 1% year over year. This number includes the employees who would be impacted by the 2023 layoffs.

Meta’s Family of Apps

Meta, which also owns Instagram and WhatsApp, said its community across the Family of Apps continues to grow. Over 3 billion people used at least one of its apps every day in March and about 3.8 billion people used it at least one monthly, it noted.

Facebook’s daily active users were 2.04 billion, up 4% or 77 million compared to last year. Daily active users represented approximately 68% of the 2.99 billion monthly active users in March. Monthly active users grew 53 million or 2% compared to last year.

Meta, which generates most of its revenue from advertising, witnessed growth in this area in the first quarter, after three quarters. Its ad revenue increased to $28.1 billion from $26.9 billion in the year-ago period.

The social media firm anticipates its full-year 2023 total expenses to be $86 billion – $90 billion, updated from the prior outlook provided in March. It expects capital expenditure to be in the range of $30 billion – $33 billion, unchanged from the prior estimate. 

“We believe increasing our organisational efficiency is vital to our long-term success. This will increase the speed of execution and agility to ensure we are constantly innovating for the people who use our services,” CFO Li said.