Meta Platforms (META 2.96%), the tech behemoth behind Facebook, Instagram, and WhatsApp, released its first-quarter 2024 earnings on Wednesday, April 24. The social media specialist's report included upbeat data about Q1 itself. Revenue and earnings per share (EPS), for instance, both came in ahead of analysts' average forecasts. But it also raised potential issues related to cost control and profitability going forward.
| Metric | Q1 2024 | Analyst Estimate | Q1 2023 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $36.5 billion | $36.1 billion | $28.6 billion | 27% |
| EPS | $4.71 | $4.32 | $2.20 | 114% |
| Net income | $12.4 billion | N/A | $5.7 billion | 117% |
| Ad impressions | N/A | N/A | N/A | 20% |
| Average price per ad | N/A | N/A | N/A | 6% |
Data source: Meta Platforms. Analyst source: FactSet via Xignite. YOY = Year over year.
Understanding Meta Platforms
Meta Platforms, previously known as Facebook, stands at the forefront of social media and technology. It owns a suite of apps that billions globally use to connect, share, and discover. Beyond social media, Meta is diving deep into the development of the metaverse, a virtual realm for users to interact in virtual reality spaces.
Meta's core business still relies heavily on advertising. The sustained growth in ad revenue highlights the robust demand for Meta's advertising solutions. This revenue fuels the company's strategic bets on the metaverse as well as its growing efforts related to artificial intelligence (AI).
Quarterly highlights
During the quarter, Meta Platforms made significant strides in enhancing user engagement across its app family. The launch of new AI-driven features and the optimization of ad delivery mechanisms contributed to a noticeable increase in ad impressions (up 20% year over year) and the average price per ad (up 6%). This dual achievement demonstrates Meta's adeptness at both expanding its advertising reach and ensuring the value of its ad inventory grows.
Meta's balance sheet remains strong, with substantial cash flow to support its ambitious projects. Building out a metaverse to help shape the future of digital interaction is one ambitious project Meta is investing heavily in. It's leveraging virtual reality (VR) and augmented reality (AR) technologies as part of this effort. However, this venture from its Reality Labs segment has yet to turn a profit, and it generated $3.85 billion in operating losses just in Q1.
Escalating regulatory pressures, particularly in the European Union and the United States, are also pressuring Meta's balance sheet. Total costs and expenses in Q1 were $22.64 billion, an increase of 6% year over year. Addressing these regulatory hurdles is pivotal for maintaining its growth trajectory.
Looking ahead
Looking forward, Meta Platforms management expressed a cautiously optimistic outlook but it also guided for increased costs. The heavy emphasis on spending to build out metaverse and AI projects indicates that Meta is not shying away from its long-term visions, despite short-term profitability challenges. Management anticipates full-year 2024 capital expenditures will be in the range of $35 billion to 40 billion, an increase from prior projections of $30 billion to $37 billion in costs. Meta expects capital expenditures will continue to increase in 2025 as it funds some ambitious AI research and product development efforts.
These strategically vital areas are expected to lay the groundwork for Meta's future growth and market position. Investors and analysts will be watching closely to see how Meta balances these investments with the need for operational efficiency and profitability.
Meta Platforms finds itself at a critical juncture. On one hand, there's the promise of the metaverse and AI reshaping how people connect and interact. On the other, there are present challenges of regulatory scrutiny and the need for substantial investment in these new technologies. Understanding how Meta navigates these waters will be crucial for stakeholders.
