To The Moon

Everything You Need to Know About Meta's Latest Earnings Report

On April 24, Meta reported its earnings result for the first quarter of FY24. It reported Q1 2024 revenues of $36.46 billion, beating the $36.14 billion estimate and marking a 27% year-over-year increase. EPS was $4.71, above the expected $4.32.

Disappointing Q2 Outlook Triggers Meta Stock Plunge

The primary factor troubling investors is the profit squeeze resulting from reduction in sales and increase in expenses. This directly affects the market's assessment of the company's short-term earnings trend, inevitably recalling the nightmare from two years ago.

On one hand, Meta's revenue guidance fell short of expectations. $Meta Platforms, Inc.(META)$   forecasts total revenue for the second quarter to be between $36.5 billion and $39 billion. The midpoint of Meta's revenue outlook also falls below the market's general expectation of $38.3 billion. TheStreetPro's James "Rev Shark" Deporre states: " there is growing concern that even strong reports won't be sufficient. The market expects strong numbers, but the worry is that it is already priced in, and the likelihood is that the torrid growth rate will cool."

"Historically, investing to build these new scaled experiences in our apps has been a very good long-term investment for us and for investors who stuck with us and the initial signs are quite positive here too," Zuckerberg said. "But building a leading AI will also be a larger undertaking than the other experiences we've added to our apps and this is likely going to take several years."

Here Is the Breakdown of Meta's Earnings

-Ad revenue experienced a substantial increase in the first quarter. In Q1, advertising revenue was $35.6 billion, a 26.8% increase year-over-year. Meanwhile, the average advertising price rose by 6%."For all the recent scrutiny of its effectiveness, Meta's ad business is humming," said EMARKETER senior analyst Max Willens. "With inventory levels and average price per ad rising, Meta is back to delivering enviable margins."

DAP (Daily Active People) is a key factor supporting the strong increase in advertising revenue. Meta reported that as of March 2024, its applications had 3.24 billion daily active users, up from 3.19 billion in December 2023. The company also mentioned that its Twitter-like app Threads, launched in July of last year, has exceeded 150 million monthly active users (up from 130 million the previous quarter). There is also news this month that advertisers may be able to purchase ads on the Threads platform as early as the second half of this year. However, the company also stated that it will no longer specifically disclose Facebook's user data, indicating that user growth may stabilize and is not expected to see significant increases in the future.

Meta's emphasis on integrating AI into its products has yielded strong financial results for the second consecutive quarter. According to the earnings call, Meta mentioned that leveraging AI is to provide increased automation for advertisers. Additionally, Meta indicated that by applying AI models to Reels, there was an 8% to 10% increase in watch time. It was also noted that using AI-powered recommendations in Reels shows important trends that will drive user engagement.

-Cost reductions resulting from layoffs contributed to profit improvements. From the end of 2022 to the first half of 2023, Meta dismissed about 21,000 employees, and Zuckerberg stated that the company's future hiring would be relatively small in scale. As of March 31, 2024, Meta's headcount stood at 69,329, marking a 10% reduction year-over-year.

- Meta's Reality Labs division (responsible for the Quest AR/VR headsets and the Metaverse initiatives) continued to drag down overall earnings, with a revenue of $440 million and an operating loss of $3.85 billion. The division's cumulative losses since the end of 2020 have topped $45 billion. The company reiterated that in 2024, it expects Reality Labs operating losses to "increase meaningfully" year-over-year "due to ongoing product development efforts in augmented reality/virtual reality and our investments to scale our ecosystem further."

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