Meta Platforms Inc (META)

• Meta's AI initiatives are driving significant engagement and revenue growth, with Meta AI now having over 500 million monthly active users and improvements to AI-driven feed and video recommendations leading to an 8% increase in time spent on Facebook and a 6% increase on Instagram this year alone. -
• Over 1 million advertisers used Meta's Generative AI tools to create more than 15 million ads in the last month, resulting in businesses seeing a 7% increase in conversions, demonstrating the effectiveness of AI in enhancing advertising performance. -
• Meta's advancements in AI technologies like Llama position the company as a leader in the AI space, with the upcoming Llama 4 models expected to bring new capabilities and strengthen Meta's competitive advantage in AI development. -

• Reality Labs continues to incur significant losses, with operating losses reaching $4.4 billion in Q3 2024, driven by higher headcount-related expenses and infrastructure costs - . Concerns remain about the ongoing investments without a clear path to profitability - - .
• Capital expenditures are expected to increase significantly, with a step-up in Q4 CapEx due to increases in server spend and data center CapEx - - . Continued investment in AI infrastructure could pressure future profitability.
• Uncertainty around headcount growth and cost management, as Meta is evaluating opportunities to invest in strategic priorities like Gen AI and Reality Labs in 2025, potentially leading to increased expenses without clear ROI timelines - - .

1. AI Investments and CapEx Growth
   Q: What's the outlook for AI investments and CapEx growth?
   A: Mark highlighted that AI is broadly applicable across their products, requiring significant investment in infrastructure. He expects to continue investing significantly, proud of teams building capacity, even as expenses grow. - Susan mentioned that the expected step-up in Q4 CapEx comes from increases in server spend, with significant infrastructure investment growth anticipated again in 2025. -

2. Headcount and Cost Flexibility
   Q: How flexible is headcount amid cost growth?
   A: Susan stated they are evaluating opportunities for investment with a focus on measurable ROI, including in Gen AI and Reality Labs. They are still working through their 2025 budget, focusing on streamlining operations and efficiency efforts. - -

3. Reality Labs Losses
   Q: Are we approaching peak losses in Reality Labs?
   A: Susan noted they aren't sharing expectations beyond 2024, but Reality Labs remains a strategic long-term priority with significant investment expected as they build towards their ambitious product roadmap. -

4. Meta AI Monetization Plans
   Q: Any plans to monetize Meta AI with ads?
   A: Susan explained they are currently focused on making Meta AI engaging for users. Over time, they anticipate monetization opportunities as queries broaden, but for now, the focus is on the consumer experience. -

5. Productivity Gains from AI
   Q: Are you seeing productivity gains from AI internally?
   A: Susan mentioned they are excited about using AI to increase internal productivity, particularly in coding with their internal assistant and coding agent. They are exploring LLM-based tools across various work streams to improve efficiency. -

6. Threads Growth and Monetization
   Q: How will Threads evolve and monetize over time?
   A: Susan reported strong user growth in Threads, reaching 275 million monthly active users, with engagement increasing. - They are focused on adding features and improving functionality but don't expect Threads to be a meaningful revenue driver in 2025. -

7. WhatsApp Monetization
   Q: What's the status and potential of WhatsApp monetization?
   A: Susan stated that click-to-message ads are the primary focus, with strong growth in click-to-WhatsApp ads, especially in markets like Brazil. - Paid messaging continues to grow at a strong pace, driving 48% growth in their Family of Apps other revenue line in Q3. -

8. Ads Pricing Dynamics
   Q: What's driving the 11% increase in ad pricing?
   A: Susan explained that the 11% year-over-year growth in price per ad was driven by strong advertiser demand and better ad performance. CPM growth accelerated slightly from 10% in Q2 due to lower impression growth in Q3. -

9. Third-Party AI Applications and Meta's Role
   Q: When will we see more consumer AI applications?
   A: Mark expects developers will build many consumer products using Llama. Meta is working on products like Meta AI, AI Studio, and Business AIs, seeing significant opportunity in AI-generated content enhancing user feeds over the next several years. -

10. Macro Events Impact on Revenue
    Q: Did major events boost ad revenue this year?
    A: Susan noted that events like the Olympics historically haven't had a meaningful impact on revenue, and that was largely the case this year. Growth is expected to continue benefiting from healthy global advertising demand. -

Quarterly guidance for Q4 2024:

• Revenue: $45 billion to $48 billion - (raised from $38.5 billion to $41 billion - )
• Tax Rate: low teens - (no prior guidance)

Annual guidance for FY 2024:

• Total Expenses: $96 billion to $98 billion - (raised from $96 billion - )
• Capital Expenditures: $38 billion to $40 billion - (raised from $37 billion to $40 billion - )
• Reality Labs Operating Losses: expected to increase meaningfully year-over-year - (no prior guidance)