2/1/2024: Meta Crushed Earnings Again

Meta reports Q4 earnings after market close today. Revenue was $40.1B vs. $39.18B expected. EPS was $5.33 vs. $4.96 expected. Q4 revenue grew 25% YoY and expenses actually declined 8%(!!) due to the 22% headcount reduction YoY. Their current operating margin is 41%. Given that Reality Labs Operating Losses were $4.65B for Q4, the 41% operating margin is super impressive. These metrics are actually quite similar to Q3 results. 2022 was a difficult year for Meta with no revenue growth. In 2023, Meta gradually recovered and had a top line growth rate at 20+% for Q3/Q4. It’s probably hard to sustain this level of growth rate given its already enormous size starting Q3 this year. But we will see. Meta also announced they will start paying $0.5 quarterly dividends and buying back $50B worth of stock.

Meta’s ad impressions grew 21% YoY in Q4 vs. 31% in Q3 and the CPM increased 2% YoY in Q4 vs. -6% in Q3. The CPM finally rebounded, which is a good sign since the ad impressions cannot grow 30% YoY forever. In Zuck’s prepared remarks, he spent a lot of time talking about AI and general intelligence. IMO, AI development suits Meta’s fast iteration data-driven DNA well and I believe they can do very very well there. Zuck also said they will continue to focus on Metaverse and will spend even more money on Reality Labs!! I don’t know about that. Hardware is hard. It takes a lot of time and patience. Instead of spending $20B a year for 5 years, I personally would rather spend $5B a year for 20 years. It took Apple 5+ years to launch Vision Pro and that’s 15+ years after they launched iPhone and 45+ years after the launched Apple II. . The silver lining here  is that Meta’s operating margin is 41% after the crazy spending on Metaverse. If one day Zuck wakes up and decides he doesn’t want to set money on fire any more and reduces Metaverse spend by 50%, that’s 5 extra percentage points of operating margin right there.