Meta, led by Mark Zuckerberg, experienced a sharp decline of up to 15% in after-hours trading following a Q2 revenue guidance miss.
The company anticipates Q2 revenue to be in the range of $36.5 billion to $39 billion, with the midpoint falling short of analysts’ average estimate of $38.3 billion at $37.75 billion.
Although Meta no longer discloses daily and monthly active users, it provided data on “family daily active people,” which reached 3.24 billion in the quarter, reflecting a 7% year-on-year growth.
1. Earnings Performance:
– Meta Platforms exceeded earnings per share (EPS) estimates at $4.71, surpassing the expected $4.30.
– Revenue also outperformed expectations, reaching $36.46 billion against an estimate of $36.12 billion.
– Operating margin stood at 38%, slightly above the estimated 37.2%.
2. Outlook:
– However, the company’s Q2 revenue forecast of $36.5 billion to $39 billion fell short of the estimated $38.29 billion.
– Additionally, Meta revised its full-year 2024 capital expenditure plan to $35 billion to $40 billion, up from the previous range of $30 billion to $37 billion.
3. Segment Revenue Breakdown:
– Advertising revenue hit $35.64 billion, slightly surpassing the estimated $35.57 billion.
– The Family of Apps revenue reached $36.02 billion, exceeding the expected $35.53 billion.
– Reality Labs revenue fell short of estimates at $440 million, compared to an estimated $494.1 million.
– Other revenue, however, exceeded expectations at $380 million, surpassing the estimated $300.1 million.
4. Financial Performance Metrics:
– While the Family of Apps operating income missed estimates at $17.66 billion, Reality Labs’ operating loss of $3.85 billion was better than the estimated $4.51 billion.
5. User Engagement:
– Average Family Service Users per Day totaled 3.24 billion, slightly exceeding the estimated 3.16 billion.
6. CEO Commentary:
– Mark Zuckerberg highlighted Meta’s ongoing investment in Reality Labs, expecting operating losses to increase year-over-year due to product development efforts.
– He emphasized the importance of accelerating infrastructure investments to support Meta’s AI roadmap.
7. Additional Insights:
– Dividend payments during the quarter amounted to $1.27 billion.
– Ad impressions across apps increased by 20% year-over-year.
8. Key Takeaways from Earnings Call:
– Zuckerberg emphasized significant investments in AI, anticipating major expenses before new products generate revenue.
– He acknowledged Meta’s historically volatile stock during similar phases of new product investment.
– The company aims to monetize AI services once they achieve scale, with revenue from Advantage Plus campaigns doubling over the past year.
– Meta is actively pursuing AI-driven business initiatives, including expanding business messaging and introducing new advertising options and access to larger AI models.
– The CFO highlighted ongoing tests of AI chatbots for business messaging on WhatsApp and Messenger.
– Building leading AI capabilities is viewed as a multi-year effort, with Zuckerberg expressing increased optimism about Meta’s AI potential since the last report.
$META’s Year of Efficiency is Over as it Pivots to Support the AI Roadmap!
— FY’24 Capital Expenditures: $35B – $40B (Previously $30B – $37B)
— FY’24 Total Expenses: $96B – $99B (Increased from $94B – $99B)
In summary, while Meta’s Q1 earnings exceeded expectations in several areas, concerns arise from a disappointing Q2 revenue forecast and increased capital expenditure for AI infrastructure. Nevertheless, the company remains optimistic about its AI initiatives and their potential for future monetization.
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