Meta Platforms Inc. topped forecasts for second-quarter sales and gave a rosy outlook for the current period, signaling that the social networking giant is succeeding in migrating advertisers to its new Reels short-video feature.

Shares climbed 4.5% in late trading after the company said second-quarter revenue was $32 billion, compared with analysts’ average projections for $31.1 billion. In a statement Wednesday, Meta said sales in the current quarter will be $32 billion to $34.5 billion, also topping average estimates.

The company is betting on Reels—short-form videos that are similar to what users see on rival TikTok to draw more attention to its social networks, Facebook and Instagram. The format has succeeded in increasing usage, and is now also helping draw advertisers, reigniting their spending after an industry-wide budget tightening in 2022.

Meta has been cutting thousands of jobs and teams in what CEO Mark Zuckerberg calls its “year of efficiency.” Investors have rewarded the strategy, causing the company’s stock price to more than double so far this year. Meta has also been investing heavily in artificial intelligence, using the technology to make recommendations—for both content and advertising—more tailored to users’ interests.

Net income in the second quarter was $7.8 billion, or $2.98 per share, compared with the $2.92-per-share average analyst estimate. More than 3 billion people use at least one of Meta’s products every day, the company said.

Meta shares rose as high as $325 in extended trading, after closing at $298.57.

Investments in artificial intelligence, as well as the company’s virtual reality efforts, have continued to be expensive, despite the efficiency mandate. Meta said total expenses will be $88 billion to $91 billion in 2023, more than prior projections. 

The Reality Labs division, which is in charge of realizing Zuckerberg’s vision for the metaverse, will have “meaningfully” greater losses this year than it did last year, the company said, citing the costs of product development and growing the technology.

“While Meta may be talking less about the metaverse these days, it is still determined to make the metaverse a reality, and the massive losses in its Reality Labs division are adding up,” Debra Aho Williamson, an analyst at Insider Intelligence, wrote in a note.

Meanwhile, Meta’s established social networks have continued to grow at a slower rate. The company is working to increase the amount of time each user spends on its networks, while betting on new ventures.

Instagram recently introduced a competitor to Twitter, called Threads. In the first few days after launch, Threads soared to 100 million users, though has since struggled to get all those users to return, according to estimates from web analytics firm Similarweb. 

For now, Threads is ad-free, but it may boost the business long-term. Mark Mahaney, an analyst with Evercore, has estimated that Threads could generate about $8 billion in annual revenue over the next two years and reach close to 200 million daily active users. Zuckerberg has said he won’t add advertising to Threads until it’s on a path to 1 billion users—a milestone Twitter never accomplished.

—Bloomberg News