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    Meta Platforms Inc (META)

    Q2 2024 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$487.20April 1, 2024
    Final Price$504.68July 1, 2024
    Price Change$17.48
    % Change+3.59%

    What went well

    • Meta reported a 22% revenue growth in Q2 2024, showing strong advertising demand and ongoing ad performance improvements, with broad-based strength across regions and verticals, including particular strength among smaller advertisers.
    • Meta's investments in AI are driving significant improvements in recommendations and advertising effectiveness, with Meta AI on track to become the most used AI assistant by the end of the year, signaling potential for future revenue growth in '25 and '26.
    • WhatsApp now serves over 100 million monthly active users in the U.S., and Threads is about to hit 200 million monthly active users, indicating promising user growth that could translate into significant business opportunities as these platforms scale.

    What went wrong

    • Meta expects a slowing in year-over-year revenue growth in Q3 2024 due to tough comparisons from strong growth in China-based advertisers and Reels impressions in the prior year, as well as modestly larger FX headwinds.
    • The company anticipates significant capital expenditure (CapEx) growth in 2025, driven by investments in AI infrastructure and future foundation models, which may pressure free cash flow and profitability. Uncertainty remains regarding the return on these investments, especially since generative AI products are not expected to be meaningful revenue drivers in 2024.
    • Meta is facing increasing legal and regulatory headwinds in the EU and the U.S., which could significantly impact its business and financial results, adding uncertainty and potential risks to the company's operations.

    Q&A Summary

    1. CapEx Outlook and Returns
      Q: How will significant AI CapEx investments impact returns?
      A: We expect to significantly increase our AI infrastructure investments in 2025, focusing on building it flexibly to deploy across core AI and generative AI use cases as needed. While core AI investments are delivering strong returns through improved engagement and ad performance, generative AI is in earlier stages. We don't expect generative AI products to contribute meaningfully to revenue in 2024, but they will open new revenue opportunities over time, enabling solid returns on our investments.

    2. Revenue Guidance and Ad Market
      Q: What's the outlook for revenue growth and the ad market?
      A: We're seeing healthy global advertising demand and delivering ongoing ad performance improvements, which we expect to benefit ad spend in Q3. However, we anticipate year-over-year growth to slow due to lapping strong growth from China-based advertisers and Reels impressions from a year ago, as well as modestly larger FX headwinds.

    3. Monetization of Threads and WhatsApp
      Q: How do you view monetizing Threads and WhatsApp?
      A: Threads reached almost 200 million users, but scaling to 1 billion will take years, and monetization will follow thereafter. We're excited about this rare opportunity. For WhatsApp, particularly in the U.S., increased usage is significant since the U.S. accounts for a large portion of our revenue, presenting a substantial business opportunity over time.

    4. AI's Impact on Future Business
      Q: Which AI use cases will drive business in '25 and '26?
      A: The primary drivers will be AI enhancements to existing products, improving content recommendations and advertising effectiveness. New initiatives like Meta AI and AI Studio will boost engagement soon, but their monetization is expected to be years away.

    5. Marketplace Monetization and Headcount
      Q: What are plans for Marketplace and headcount growth?
      A: Marketplace is key in our commerce strategy to create the best shopping experience. We're pleased with strong year-over-year growth in Shops ads revenue. Regarding headcount, we expect to end 2024 with numbers meaningfully higher than 2023, focusing hiring on priority areas while maintaining disciplined processes.

    6. CapEx Planning for Llama Models
      Q: How does building for Llama models influence CapEx?
      A: Infrastructure planning is dynamic as we define the scope of generative AI roadmaps. We're constructing data centers with long-term flexibility, considering capacity for training future Llama generations and supporting uses like inference, core ads, and content ranking.

    7. U.S. Young Adult User Growth
      Q: Can you quantify young adult usage growth?
      A: We've seen healthy growth in young adult app usage in the U.S. and Canada over several quarters, with particular traction in Groups and Marketplace. Posting to Groups has been boosted mainly by young adults, and they're active users of Marketplace.

    8. Llama 3.1 and Enterprise Services
      Q: How will Llama 3.1 support enterprise services?
      A: Llama is an open-source foundation model that developers can shape into diverse products. By open-sourcing, we foster an ecosystem enhancing our infrastructure. We're focusing on business applications like AI agents, enabling businesses to quickly deploy agents for customer interaction and support.

    9. Ray-Ban Partnership Opportunities
      Q: How will you deepen the Ray-Ban partnership?
      A: The second-generation Ray-Ban Meta glasses are exceeding expectations. We aim to partner with EssilorLuxottica to build new generations of glasses, integrating AI functionalities and improving the product further. There's a lot more to come, and all signs are good.

    10. Future AI Roadmap Beyond Assistants
      Q: What other AI areas are in the 5-year roadmap?
      A: We're planning future Llama models with capabilities to support broad utility in products like Meta AI, enabling businesses and individuals to create AI agents. This includes integrating AI into products like real-time, multimodal glasses to enhance content discovery and interaction.

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