Meta Platforms (NASDAQ: FB) released its first-quarter 2022 earnings after the markets closed on Wednesday, April 27. The company, formerly known as Facebook, revealed that it added a remarkable 50 million users to its family of apps, including Facebook, Instagram, Messenger, and WhatsApp.
The colossal growth comes as it nears four billion monthly active users and three billion daily ones. The markets liked what they saw from Meta, and the stock surged on the day following the report.
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Meta Platforms monthly active users approach 4 billion
As of March 31, Meta Platforms boasts 3.84 billion monthly active users. That figure was up by 50 million from the previous quarter. Perhaps more impressively, the total was up by 210 million from the same time in the prior year. The fact that Meta can add hundreds of millions of users despite its massive size should encourage shareholders.
Before the quarter's release, there was a genuine concern that Meta might find it challenging to add new users. After all, it already had nearly four billion, and the planet's total population is roughly eight billion. The robust growth in Q1 should put some of those concerns to rest. As you might already know, Meta's apps are free to join and use; it makes money by showing advertisements to users browsing the app.
FB Revenue (Quarterly) data by YCharts.
In that regard, user growth is crucial because advertisers are willing to pay more to influence more people. Similarly, marketers will pay more for the opportunity to persuade the more affluent. Users from regions with higher per capita income generate higher revenue. For instance, Facebook earned an average revenue per user of $48.29 from folks in the U.S. and Canada in the quarter that ended in March. In contrast, it earned just $4.47 from its users in the Asia-Pacific region.
That said, Apple recently updated its platform to make it more difficult for Meta Platforms to collect data on its users. The feature makes it harder for Meta to sell targeted advertising that generates higher returns on spending for marketers. Already, the headwinds are showing up as the price per ad Meta earned in Q1 was 8% lower than the same quarter the prior year.
What this could mean for Meta investors
FB Total Operating Expenses (Quarterly) data by YCharts.
As Meta transforms into a metaverse company, growth in active users will be key in sustaining revenue and cash that it can invest in the change. In Q1, revenue increased by 7% from the previous year. However, income from operations fell by nearly $3 billion as Meta invested in research and development. After observing the significant fall in operating income, management recalibrated its spending plans for the year and lowered them by about $3 billion.
The road ahead will be bumpy, to be sure. Morphing from a social media giant that earned $118 billion in revenue in 2021 into a metaverse company will take time, energy, and billions in spending. If Meta can sustain robust user growth, it will increase the probability of success for that transition.
