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Meta Platforms Inc Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- The company's community across the Family of Apps continues to grow, and more than 3.3 billion people used at least one of the Family of Apps on a daily basis in December.
- Revenue from Reality Labs segment in Q4 was $1.1 billion, up by 1% YoY.
- The total number of ad impressions served across the services increased by 6% in Q4, and the average price per ad increased by 14%.
- The company expects to use both its non-AI and AI servers for a longer period of time before replacing them, which will deliver savings in annual CapEx and resulting depreciation expense.
- The company expects to see impression growth opportunities on unmonetized surfaces like Threads, which it is beginning to test in Q4.
- Reality Labs expenses were $6 billion, up 6% YoY, driven by higher infrastructure costs and employee compensation.
- Cost of revenue increased by 15% due to higher infrastructure costs.
- Family of Apps expenses were up 5% due to growth in infrastructure costs and employee compensation.
- Services like video have lower monetization efficiency and broader macro factors.
- The company expects to bring online almost 1 gigawatt of capacity this year.
- The company expects to fund its 2 gigawatt and potentially bigger AI data center by investing aggressively in initiatives that use AI advances to increase revenue growth.
- The company expects employee compensation to be the second largest factor as it adds technical talent in the priority areas.
- The company expects to deliver ongoing ad performance improvements through ongoing work across its monetization road map, which will have the effect of benefiting pricing overall.
- The company expects to use both non-AI and AI servers for a longer period of time before replacing them, which will deliver savings in annual CapEx and resulting depreciation expense.
Q&A Highlights from Meta Platforms Inc Earnings Call Q4 2024
- Analyst asked about custom silicon and how it compares to third-party chips in ranking models and results.
- Mark Elliot Zuckerberg explained that Meta AI is a highly intelligent and personalized assistant that is integrated into the company's apps and website. He also mentioned that the quality of Meta AI has improved significantly over the past year and that the company is focused on making it more useful and accessible to users.
- Mark Elliot Zuckerberg explained that Meta AI is a highly intelligent and personalized assistant that is integrated into the company's apps and website. He also mentioned that the quality of Meta AI has improved significantly over the past year and that the company is focused on making it more useful and accessible to users.
- Analyst asked about the company's views on open source and how it can improve return on capital for AI over the medium to long term.
- Mark Elliot Zuckerberg stated that the company's approach to open source is similar to its approach with Open Compute, where it shared its systems and standardized them, leading to improved efficiency and cost savings for everyone. He also mentioned that as Llama becomes more popular, it's more likely that silicon providers and other platforms will optimize their work for it, driving down costs and improvements that Meta can use as well. Additionally, he noted that recent news, such as DeepSeek from China, has strengthened the company's conviction that an American standard for AI is important for national advantage.
- Mark Elliot Zuckerberg stated that the company's approach to open source is similar to its approach with Open Compute, where it shared its systems and standardized them, leading to improved efficiency and cost savings for everyone. He also mentioned that as Llama becomes more popular, it's more likely that silicon providers and other platforms will optimize their work for it, driving down costs and improvements that Meta can use as well. Additionally, he noted that recent news, such as DeepSeek from China, has strengthened the company's conviction that an American standard for AI is important for national advantage.
- Analyst asked about the progress of smart glasses, Orion, and how they view it as a better form factor to get the most out of the Meta AI assistant.
- Mark Elliot Zuckerberg stated that glasses are the ideal form factor for an AI device because they allow the AI assistant to see and hear everything that the user sees and hears, providing context for the user to talk to it about. He believes that glasses will be a very important computing platform in the future, and that AI will drive a lot of value. He also mentioned that Ray-Ban Metas were a hit, but the long-term trajectory for this is unknown, and they're going to learn a lot this year.
- Mark Elliot Zuckerberg stated that glasses are the ideal form factor for an AI device because they allow the AI assistant to see and hear everything that the user sees and hears, providing context for the user to talk to it about. He believes that glasses will be a very important computing platform in the future, and that AI will drive a lot of value. He also mentioned that Ray-Ban Metas were a hit, but the long-term trajectory for this is unknown, and they're going to learn a lot this year.
- Analyst asked about pricing growth and how the company plans to drive revenue growth across both pricing and impression growth, as well as the average price per ad metric.
- Susan J. Li stated that the company expects to continue to deliver ongoing ad performance improvements through their monetization roadmap, which will benefit pricing overall. She mentioned that the average price per ad metric is complex and blends various factors, such as advertisers' bids and actions. The company is seeing healthy cost per action trends for advertisers, and they believe they will continue to get better at driving conversions for advertisers, resulting in higher-value impressions and continued lift in CPMs.
- Susan J. Li stated that the company expects to continue to deliver ongoing ad performance improvements through their monetization roadmap, which will benefit pricing overall. She mentioned that the average price per ad metric is complex and blends various factors, such as advertisers' bids and actions. The company is seeing healthy cost per action trends for advertisers, and they believe they will continue to get better at driving conversions for advertisers, resulting in higher-value impressions and continued lift in CPMs.
- Analyst asked about fact checking and content policies, specifically regarding the recent changes and their impact on usage and advertiser adoption.
- Mark Elliot Zuckerberg stated that the company is focused on building the best service for people, and that they believe the Community Notes system is more effective than the system they had before. He mentioned that the company hasn't seen any noticeable impact from their content policy changes on advertiser spend, and that they are continuing to see strong advertiser demand, particularly for AI-powered tools. He also stated that their commitment to brand safety is unchanged, and they expect to invest in their suite of tools to meet the needs of advertisers.
- Mark Elliot Zuckerberg stated that the company is focused on building the best service for people, and that they believe the Community Notes system is more effective than the system they had before. He mentioned that the company hasn't seen any noticeable impact from their content policy changes on advertiser spend, and that they are continuing to see strong advertiser demand, particularly for AI-powered tools. He also stated that their commitment to brand safety is unchanged, and they expect to invest in their suite of tools to meet the needs of advertisers.
- Analyst asked about Meta Platforms Inc.'s CapEx budget for 2025 and any constraints they may be facing in terms of supply availability, resources planning, or external ecosystem factors.
- Susan J. Li, Meta Platforms Inc.'s Chief Financial Officer, stated that the company is staying on top of supply availability and planning to significantly ramp up deployment of GPUs in 2025. They are engaging with vendors and investing in their own silicon to meet those needs. However, they do not have any updates to share on supply availability at the moment. Li also mentioned that it is too early to determine long-run capital intensity, as there are many factors that can influence it, such as the pace of advancement in underlying models, the adoption and use case of generative AI products, and the monetization or other efficiency gains from AI investments.
- Susan J. Li, Meta Platforms Inc.'s Chief Financial Officer, stated that the company is staying on top of supply availability and planning to significantly ramp up deployment of GPUs in 2025. They are engaging with vendors and investing in their own silicon to meet those needs. However, they do not have any updates to share on supply availability at the moment. Li also mentioned that it is too early to determine long-run capital intensity, as there are many factors that can influence it, such as the pace of advancement in underlying models, the adoption and use case of generative AI products, and the monetization or other efficiency gains from AI investments.
- Analyst asked about employee compensation as the next largest driver of expense growth in 2025 and how the company is thinking about hiring needs.
- Kenneth John Dorell, Meta Platforms Inc.'s Chief Operating Officer, explained that employee compensation and headcount growth are primarily driven by infrastructure monetization, generative AI, Reality Labs, and regulation and compliance, which are more technical organizations. The company is focused on running the company efficiently while also investing to win, and they want to staff those priority areas in a way that positions them to best do that.
- Kenneth John Dorell, Meta Platforms Inc.'s Chief Operating Officer, explained that employee compensation and headcount growth are primarily driven by infrastructure monetization, generative AI, Reality Labs, and regulation and compliance, which are more technical organizations. The company is focused on running the company efficiently while also investing to win, and they want to staff those priority areas in a way that positions them to best do that.
- Analyst asked about Meta AI's monetization potential and how Llama 4 reasoning can help drive new agentic experiences.
- Mark Elliot Zuckerberg, Meta Platforms Inc.'s CEO, discussed the direction of agents and reasoning in AI products, where they are moving from chat to more agentic behavior and commercial intent. He mentioned that these systems will be able to perform multistep tasks and that the company will focus on scaling the AI product to reach 1 billion people or more before focusing on monetization. He also noted that the actual business opportunity for Meta AI remains outside of 2025, for the most part, but the company has a process of building products, making them good, scaling them, and building out the business around them, which they are confident in.
- Mark Elliot Zuckerberg, Meta Platforms Inc.'s CEO, discussed the direction of agents and reasoning in AI products, where they are moving from chat to more agentic behavior and commercial intent. He mentioned that these systems will be able to perform multistep tasks and that the company will focus on scaling the AI product to reach 1 billion people or more before focusing on monetization. He also noted that the actual business opportunity for Meta AI remains outside of 2025, for the most part, but the company has a process of building products, making them good, scaling them, and building out the business around them, which they are confident in.
