Meta Platforms Inc. shares surged after the social media company reported first-quarter revenue that exceeded analysts’ estimates and signaled the beginnings of a recovery in digital advertising.

First-quarter sales rose to US$28.6 billion — a return to growth after three straight quarters of declines. That compared with the US$27.7 billion average analyst projection. Shares gained more than 12 per cent in after-market trading.

The company said revenue in the current quarter will be as much as US$32 billion, compared to the US$29.5 billion average estimate.

Meta, the owner of Facebook, Instagram and WhatsApp is working to move faster while cutting costs in what Chief Executive Officer Mark Zuckerberg has dubbed the “year of efficiency.” A slowdown in advertising demand over the last year forced the social media giant to slash headcount and reduce spending, and sparked scrutiny of the billions Zuckerberg has been investing in virtual reality technology. As it pares costs, Meta is still pouring money into strategic areas like artificial intelligence and the metaverse.

Meta continued to add users in the March quarter for Facebook, Instagram and WhatsApp. Altogether, more than 3 billion people used at least one of its products daily — a new milestone.

Still, there were some setbacks, including in Meta’s division focused on building virtual reality technology for the metaverse. The unit, called Reality Labs, had an operating loss of US$3.99 billion in the quarter, and brought in revenue of US$339 million — down 51 per cent from a year earlier and less than analysts projected.

The metaverse will become a “sideshow” this year as the company is “likely to double down on generative AI and large language models,” said Mandeep Singh, an analyst with Bloomberg Intelligence. “Not paring Reality Labs investments could be a sticking point with investors.”

Capital expenditures in the first quarter rose to US$7.09 billion, compared to US$5.55 billion in the same period last year. Meta reported net income of US$5.7 billion, or US$2.20 per share, more than the average estimate of US$2.01 per share.

Meta’s stock has climbed 74 per cent this year through the close on Wednesday, recovering from its worst year on record with a 64 per cent decline in 2022. Shares climbed as high as US$236.20 in extended trading following Wednesday’s report, after closing at US$209.40.