Meta Platforms (META) — Follow Up Call – April 27, 2024
CFO Susan Li hosted Meta’s quarterly follow-up call this week following earnings. There was a lot of repetition, but some new ideas to cover.
Li told investors that Meta’s “year of efficiency” learnings would be carried with it throughout the 2024 and 2025 CapEx ramp. As I said in the review, this is not Meta throwing margin preservation as a focus area in the garbage. It will walk and chew gum here.
Furthermore, this CapEx is positioning Meta for years, not quarters to come. This spend will handle AI training clusters and inference workloads through the next several versions of its Llama models. Importantly, this CapEx capacity is also somewhat flexible in terms of use case. This goes back to the new data center format that Meta is utilizing which frees more seamless scaling and shifting of workloads. That way, if Meta overestimates what it needs for its GenAI model and app work, it will be able to seamlessly re-allocate the compute to AI ranking and recommendation models. This will not be wasted money; there are many positive return on investment areas to use this compute, regardless of how correct they are about GenAI.
We also got a bit more color on the revenue guide and Reels monetization. The aggressive ramping in ad load and impressions for Reels happened in 2023. There’s a bit more work to do to bring that load to parity with Feed and Stories, but the bulk of the catch-up is now in the past. When pairing that with much tougher comps and FX swinging from a tailwind to a headwind, we are left with the slightly soft Q1 revenue guide. Still, it remains adamant that ad demand (including for Chinese sellers) remains strong, along with app engagement.
