Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Meta Platforms Inc (META, Financial) reported strong user growth, with over 3.2 billion people using at least one of their apps daily.
- WhatsApp now serves more than 100 million monthly active users in the US, showing significant growth.
- Meta AI is on track to become the most used AI assistant by the end of the year, indicating strong adoption and future potential.
- The company reported a 22% year-over-year increase in total revenue, reaching $39.1 billion.
- Meta Platforms Inc (META) has made significant advancements in AI, improving content recommendations and ad performance, which are expected to drive future growth.
Negative Points
- Reality Labs segment reported an operating loss of $4.5 billion, highlighting ongoing challenges in this area.
- The company faces increasing legal and regulatory headwinds in the EU and the US, which could significantly impact business and financial results.
- Capital expenditures are expected to increase significantly in 2025, which may put pressure on financial resources.
- Despite strong initial growth, monetization of new products like Threads and Meta AI is expected to take several years.
- Higher infrastructure and Reality Labs inventory costs contributed to a 23% increase in the cost of revenue.
Q & A Highlights
Q: Mark, can you highlight one or two generative AI-enabled use cases for users and advertisers that you're most excited about and see as potential drivers for the business in '25 and '26?
A: Mark Zuckerberg, CEO: The most impactful areas will be AI's role in improving recommendations and advertising experiences. These are already at scale and will see significant enhancements. Newer initiatives like Meta AI and AI Studio will increase engagement but will take years to monetize fully. Early indicators for Meta AI are promising, aiming to be the most used AI assistant by year-end.
Q: Susan, can you elaborate on the CapEx philosophy and how you ensure a healthy return on invested capital for investors?
A: Susan Li, CFO: We categorize AI investments into core AI and generative AI. Core AI investments are ROI-based, showing strong returns through engagement and ad performance improvements. Generative AI is in early stages, with revenue impacts expected over time. We build AI infrastructure with flexibility, allowing us to repurpose capacity as needed, ensuring efficient capital deployment.
Q: Susan, can you provide insights into the state of the overall digital ad market and areas of strength?
A: Susan Li, CFO: We see healthy global advertising demand and ongoing ad performance improvements. Year-over-year growth is expected to slow in Q3 due to strong prior-year comps and modestly larger FX headwinds. However, ad performance enhancements continue to drive positive trends.
Q: Mark, how do you view the potential for engagement growth and monetization for newer platforms like Threads and WhatsApp in the US?
A: Mark Zuckerberg, CEO: WhatsApp's growth in the US is significant, given the market's revenue potential. Threads had a strong start, reaching 200 million users quickly. However, scaling to 1 billion users and monetizing will take years. These platforms offer rare opportunities to add billion-user apps to our portfolio.
Q: Can you discuss the growth in young adult users on Facebook and Instagram in the US and Canada?
A: Susan Li, CFO: We've seen healthy growth in young adult usage, driven by products like Groups and Marketplace. Posting to groups and Marketplace activity have increased, particularly among young adults, supported by product improvements and demand for secondhand products.
Q: What are your plans for monetizing Marketplace, and how do you view headcount growth going forward?
A: Susan Li, CFO: Marketplace is part of a broader commerce strategy focused on enhancing shopping experiences. Shops ads revenue is growing strongly. Regarding headcount, we expect to end 2024 with higher headcount than 2023, focusing on priority areas while maintaining disciplined hiring.
Q: Are there plans to open up Llama 3.1 to broader web searches or link it to third-party marketplaces?
A: Mark Zuckerberg, CEO: Llama 3.1 powers various products, including Meta AI and business agents. We aim to build a comprehensive AI assistant with broad utility. The open-source approach ensures we have the leading infrastructure, supported by an ecosystem of developers and partners.
Q: Can you elaborate on the partnership with EssilorLuxottica for Ray-Ban Meta glasses?
A: Mark Zuckerberg, CEO: The partnership is strong, with the second generation of Ray-Ban Meta glasses performing well. We plan to continue developing new generations and enhancing AI functionality, making the glasses a leading consumer electronics product.
Q: How do you envision the product vision for Llama 3.1 and its applications for enterprise services?
A: Mark Zuckerberg, CEO: Llama 3.1 serves as the foundation for various products, including Meta AI and business agents. We aim to enable businesses to create AI agents for customer interactions, leveraging the open-source ecosystem to enhance capabilities and drive innovation.
Q: What other areas in AI are you focusing on in your five-year roadmap, and how are you modeling the CapEx roadmap for AI infrastructure?
A: Mark Zuckerberg, CEO: We're planning for future foundation models like Llama 4 and beyond, focusing on broad utility and product innovation. Susan Li, CFO: We're building capacity with flexibility, considering long-term use cases for training, inference, and core business needs, ensuring efficient and strategic investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
