Meta Q1 2024 Earning

Meta Q1 2024 Earning

The Company's Stock Plunged 16% on Weak Revenue Guidance and higher AI spends.

Meta for Q1 2024 reported revenue increased by 27% and stood at $36.46 billion on a year-on-year basis. Advertising revenue, constituting the vast majority of Meta's business, surged by 27% in the first quarter, reaching $35.64 billion.


Net income saw a significant increase, more than doubling to $12.37 billion, equivalent to $4.71 per share, up from $5.71 billion, or $2.20 per share, recorded a year earlier. One factor contributing to the notable increase in net income is the reduction in sales and marketing expenses, which decreased by 16% compared to the same period the previous year, despite the accelerated growth in revenue.


Facebook's parent company reported capital expenditure including principal payments on finance leases of  $6.72 billion.


Apart from this, The company disclosed that the average revenue per user in the quarter stood at $11.20. The parent company of Facebook has transitioned away from reporting daily active users and monthly active users. Instead, it now provides a metric called "family daily active people." In March 2024, this figure stood at 3.24 billion, representing a 7% increase compared to the previous year.


In the first half of 2023, the company implemented significant workforce reductions, cutting approximately 21,000 jobs. Mark Zuckerberg indicated in February of this year that the company's hiring activities would be "relatively minimal compared to what we would have done historically." As a result, headcount decreased by 10% in the first quarter compared to the previous year, totaling 69,329 employees.


Meta's CEO Mark Zuckerberg emphasized on April 23rd that Meta will maintain operational efficiency while reallocating resources towards investments in AI. He noted that this shift will significantly expand the company's investment capacity.


In addition to Meta's focus on generative AI initiatives, Zuckerberg expressed optimism about the company's smart glasses collaboration with Ray-Ban. During the earnings call, he mentioned that these glasses have seen strong demand, with "many styles and colors" selling out. Zuckerberg also highlighted the device's multimodal AI capabilities, which have recently become more widely accessible.


Mets expects second quarter 2024 total revenue to be in the range of $36.5-39 billion. Moreover, the company expects full-year 2024 total expenses to be in the range of $96-99 billion, updated from its prior outlook of $94-99 billion due to higher infrastructure and legal costs.


The company's Reality Labs unit, responsible for developing hardware and software for the emerging metaverse, remains incurring significant losses. In the quarter, Reality Labs recorded sales of $440 million but reported losses amounting to $3.85 billion. Cumulatively, since the end of 2020, total losses for the division have surpassed $45 billion.


Meta CFO Susan Li mentioned that Meta anticipates its Reality Labs division to continue reporting higher year-over-year operating losses. This projection aligns with the company's ongoing development and expansion of its various AI, AR, and VR initiatives.


In the earnings call, Li stated, 'While we are not providing guidance for years beyond 2024, we expect capital expenditures will continue to increase next year as we invest aggressively to support our ambitious AI research and product development efforts.


Mark Zuckerberg kicked off Meta's earnings call by discussing artificial intelligence before transitioning to the metaverse, highlighting the company's headsets, glasses, and operating system. However, he predominantly focused on detailing the various areas where Meta incurs financial losses in his opening remarks.


Despite Meta reporting better-than-expected profit and revenue for the first quarter, investors responded negatively.


Meta's shares took a sharp dive of 16% during extended trading on 24th April following the company's issuance of a subdued forecast resulting in the loss of over $200 billion in market capitalization. This overshadowed the better-than-expected first-quarter results. The company's shares experienced their second-highest one-day loss in stock value, following the record-setting loss of $232 billion on February 3, 2022. That date marked the largest single-day loss of market capitalization for any US company.


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