Meta Platforms (META) – Earnings Review – February 2, 2024

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Meta Platforms (META) – Earnings Review – February 2, 2024


  • Beat estimate by 2.8% & beat guide by 4.8%. Its 12.6% 3-year revenue compounded annual growth rate (CAGR) compares to 16.6% Q/Q & 19.6% 2 quarters ago.
    • Without unexpected foreign exchange (FX) help, revenue would have beaten estimates by 0.5% and guidance by 2.5%. FX neutral revenue growth was 22% Y/Y.
    • Reality labs beat by 31.6%. Note that the Quest 3 launch propped up revenue here vs. the prior year period. Quest 3 launched in Q4 2020.
    • Family of Apps (FOA) beat by 2.2%.
  • Meta set a 2 year record for DAUs as a % of monthly active users (MAUs). This is direct evidence of improving engagement.
  • Beat total daily active user (DAU) estimate by 1% & slightly beat total MAU estimates.
  • Price per ad rose by 2% Y/Y vs. expectations of -4.1% Y/Y growth.
  • Ad impression growth roughly met expectations.

Note that Y/Y comps are easy and 3-year comps are uniquely difficult.

FOA = Family of Apps; ARPP = Average Revenue per Person

DAU = Daily Active User; MAU = Monthly Active User

Source: Brad Freeman – SEC Filings, Company Presentations, and Company Press Releases


  • Beat EBIT estimates by 4.7%.
    • Without any restructuring charges, EBIT margin would have been 43.6% instead of 40.8%.
    • FOA EBIT beat by 7%.
    • Reality Labs EBIT missed by 13.4%.
  • Beat free cash flow (FCF) estimates by 28%.
  • Beat $4.94 GAAP EPS estimates by $0.39.

Note that Y/Y margin comps are very easy and 3-year margin comps are very difficult.

Guidance & Valuation

Next quarter guidance was a robust 5.5% ahead of expectations. Very strong for a company at this scale with as many analyst eyeballs on it as it has.

2024 operating expense (OpEx) guidance  was reiterated at $96.5 billion. Capital Expenditure (CapEx) guidance was raised from $32.5 billion to $33.5 billion due to ramping investment in AI infrastructure to support the technology’s boom. Infrastructure investments will continue to grow beyond 2024.

Balance Sheet

Meta declared its very first dividend of $0.50 per share. This may not seem meaningful, but it opens Meta up to significantly more investment demand. Many funds focus strictly on dividend-paying investments.

  • $65 billion in cash & equivalents (I wish regulators would let it buy something).
  • $18.4 billion in debt.
  • Basic share count fell 2.8% Y/Y.
  • $80.9 billion left in buyback capacity as it added a new $50 billion buyback program.

Call & Release Highlights

Playbook for Leading in AI:

Zuck’s talk was dedicated to laying out Meta’s 5 part plan to lead in AI in the decades to come. I’ll spell it out here. Part one is building world class GenAI infrastructure. Zuck spoke on the criticism he took for the heavy CapEx through 2021-2022, but now sees that decision as setting Meta up very nicely in the years to come. The company underspent when it debuted Reels on GPU clusters to support the product. So? It decided to get aggressive with a large, 350,000 Nvidia H100 Chip order this past month to ensure that it has the supply it needs. It’s going to “remain on the offensive here” and will “play to win.” Exploding FOA profitability and profits overall give it the permission to do this in my view. Zuck thinks “general AI” (multi-modal models that can do everything from reason to plan to code to remember” will be vital. This is how it will make sure it has the resources to deliver what it needs to. Investments here will remain aggressive in the years to come, as its guidance spells out.

“After underspending on Reels,  I decided that we should build enough capacity to support both Reels and another Reels-sized AI service that we expected to emerge to avoid that situation again. The decision at the time was controversial, but I’m so glad we made it.” – King Zuck

Part two is its open source approach to software. Whether it’s through Llama 2 or subsequent models, Meta makes its “general infrastructure” available to all developers “while keeping specific product implementations and data proprietary.” This allows it to thread the needle of not giving up competitive edges while letting 3rd party developers build in its ecosystem. What does all of this building mean? It makes Meta a low cost operator for innovating in GenAI. Developers want access to consumer traffic and great models to build products they know will be utilized. That’s what Meta delivers with Llama and 4 billion people on its Family of Apps. By outsourcing some of this iteration and innovation work, Meta sheds costs associated with product development.

Foundational models are likely going to be commoditized in the future. Knowing this, Meta is flooding the market with open-source Llama models (like it’s doing with Quest) knowing that it can monetize elsewhere with subscriptions and app take rates. If there’s no differentiation between this great model and that great model where will consumers go? Where the best consumer apps are. And where will developers go? Where the consumers are. The open source approach nurtures this compelling positive feedback loop. Meta always takes its sweet time with monetization. Whether it was Facebook, Instagram, WhatsApp or now AI, it will only monetize once it knows it has already won. Other advantages of open sourcing include open-source simply being more popular among most developers. This helps it attract the best talent in the world.

“Usually, only when we reach that kind of scale do we start focusing on what monetization will look like.” – King Zuck

Part 3 is taking the “long approach to development” as it has already begun work on Llama models up to version 7. Part 4 is utilizing its world-class data set to train algorithms and part 5 is supporting a culture of rapid experimentation. Products coming from this philosophy in the near future will include Meta AI (its GenAI assistant which was just released into beta testing), Business AI products (for customer support), its Creator AI series to help anyone (like Snoop Dog and Tom Brady as early examples) create a personal AI and more.

This is the playbook for how Meta plans to succeed… and it mimics the playbook for how it has succeeded in the past.


It continues to more effectively target ads for clients thanks to better consumer data leveraging. This will be a continuous process. Its Advantage+ suite (helps perfect campaign creation) is infusing more of Meta’s AI work into its processes to uplift campaign automation. It also just debuted Text Variations and Image Expansion, which are two GenAI products to further assist marketers in campaign optimization. Initial adoption of these tools was called “strong.” It’s also upgrading the conversions API (which allows for data sharing across Meta’s apps) to make data onboarding more intuitive. It’s in early beta testing on the WhatsApp AI tools for automated customer support interactions teased at the Meta Connect event. Finally, it told us that Meta Shops Ads (designed to pull consumers to your stores) crossed a $2 billion revenue run rate. This type of on-site conversion advertising, along with other business messaging products, make Meta even less reliant on 3rd party data access. That’s a big reason as to how it bounced back so quickly post Apple’s data sharing policy changes. That, and its massive supply of relevant 1st party data.


  • Quest 3 is off to a “strong start” as it topped the app store rankings list for the holiday season.
  • Ray Ban will make more smart glasses due to “high demand.”

Reels, WhatsApp, Business Messaging & Threads:

WhatsApp continues to gain meaningful traction in the United States. This was once thought to be a pipe dream. WhatsApp’s newer “Channels” (one way messaging to large groups of people) product is growing rapidly. It has 500 million MAUs since launching last quarter. Business messaging from WhatsApp is becoming a material part of the business. It drove 82% Y/Y growth in FOA’s other revenue segment to reach $334 million.

Reels is now a revenue growth tailwind for Meta a quarter earlier than expected. It enjoys 3.5 billion re-shares per day. It will now work to “unify the recommendation systems across all types of video” to enhance content matching. Reels is enjoying 25% Y/Y growth in daily watch time across all apps as content ranking improves. Threads is “growing steadily” and now has 130 million MAUs vs. less than 100 million Q/Q.

Key Financial Metrics:

OpEx fell 8% Y/Y mainly due to lower restructuring charges and headcount reductions. Headcount fell 22% Y/Y, but rose 2% Q/Q as Meta resumes hiring.

Advertising revenue growth was 19% in UCAN, 23% in Asia Pacific (APAC), 33% in Europe and 32% in Rest of World (RoW). All regions accelerated vs. last quarter aside from Europe. Online commerce, entertainment, media and gaming where the sector standouts for ad demand. Ad pricing growth of 2% Y/Y was much better than -4% Y/Y growth expected. FX tailwinds helped, but “strong advertiser demand” did too. Notably, Chinese sellers drove strong demand growth in advertising and made up 10% of its total advertising revenue in 2023. China tends to be fine doing business with companies allowing their sellers to make more money. They’re less fine with companies trying to sell products directly to Chinese consumers. Meta doesn’t do that (Facebook is banned in China).

From a reporting standpoint, it won’t give us Facebook specific user growth anymore. Only overall DAU growth for its apps.


This quarter was flawless. Elite team; elite product suite; elite execution; elite company. Elite. Enough said.

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