Earnings Snapshot

  • Meta Platforms reported Q1 CY2024 earnings with solid revenue, operating profit, and EPS growth, beating analysts’ estimates, but provided weaker-than-expected revenue guidance for the next quarter.
  • The company introduced Meta AI, powered by the open-source large language model Llama 3, which has been rolled out across its family of apps, marking a significant step forward in its AI capabilities.
  • Despite the mixed results, Meta continues to dominate the social media landscape and invest heavily in AI development and the metaverse, but investors remain cautious about its near-term prospects, leading to a 9.4% drop in the stock price following the announcement.
Social media giant Meta Platforms (NASDAQ:META) recently reported its Q1 CY2024 earnings, revealing a mixed bag of results. While the company managed to deliver revenue and earnings in line with analysts’ expectations, its guidance for the next quarter fell short of estimates. Despite this, Meta showcased solid growth in daily active users and average ad prices, indicating that the company is still a major player in the social media landscape.

Q1 CY2024 Financial Highlights

  • Revenue: $36.46 billion, a 27.3% year-on-year decline.
  • EPS: $4.71, beating analysts’ estimates by 8.9%.
  • Gross Margin (GAAP): 81.8%, up from 78.3% in the same quarter last year.
  • Free Cash Flow: $12.53 billion, similar to the previous quarter.
  • Daily Active Users: 3.24 billion.

Meta's Revenue Growth and Guidance

Meta’s revenue growth over the last three years has been modest, averaging 16.4% annually. In Q1 CY2024, the company reported a 27.3% year-on-year revenue decline, which was in line with analysts’ expectations. However, Meta’s guidance for the next quarter indicates an expected revenue growth of 18% year-on-year to $37.75 billion, falling short of analysts’ projections of $38.32 billion.

The Importance of Social Networking for Businesses

In today’s digital age, businesses must meet their customers where they spend most of their time, which is increasingly on social networks. With users spending over 2.5 hours a day on social media platforms, companies have been shifting their advertising and marketing budgets to these channels. Meta’s family of apps, including Facebook, Instagram, WhatsApp, and Messenger, continues to dominate the social media space, making it an essential platform for businesses to reach their target audiences.

Meta's AI Advancements and Metaverse Focus

During the earnings call, Meta founder and CEO Mark Zuckerberg highlighted the company’s progress in artificial intelligence and its ongoing commitment to building the metaverse. The introduction of Meta AI, powered by the open-source large language model Llama 3, marks a significant step forward in the company’s AI capabilities. This ChatGPT competitor has been rolled out across Meta’s family of apps, offering users an innovative way to interact with the platforms.

Key Takeaways and Market Reaction

Despite the solid revenue, operating profit, and EPS growth, Meta’s earnings report left investors somewhat concerned. The weaker-than-expected revenue guidance for the next quarter and increased operating expenses and capital expenditures for the full year, primarily related to the company’s AI infrastructure, contributed to a 9.4% drop in Meta’s stock price following the announcement.

Conclusion

Meta Platforms’ Q1 CY2024 earnings report presented a mixed picture, with solid growth in some areas and challenges in others. While the company continues to dominate the social media landscape and make significant strides in AI development, investors remain cautious about its near-term prospects. As Meta navigates the evolving digital landscape and invests heavily in the metaverse, it is essential for potential investors to carefully consider the company’s valuation, business qualities, and recent performance before making investment decisions.