Meta Platforms:Quarterly Results/2024 Q4

Return to: Earnings Season

See also: Meta Platforms Valuation Model | Meta Platforms:Quarterly Results/2024 Q3 | Meta Platforms:Quarterly Results/2024 Q2 | Meta Platforms:Quarterly Results/2024 Q1

Earnings call summary

Sources: Q4 2024 Webcast | Q4 2024 Earnings Call Transcript

AI

• CEO Mark Zuckerberg said he believes this is the year when highly intelligent and more personalized AI assistant reaches more than 1 billion people.
• He still expects Meta AI to be the leading AI assistant in the world, said it's now used by more people in the world than any other AI assistant.
• Zuckerberg pointed out that he believes Meta AI to be the most transformative product they have ever build.
• Zuckerberg said Llama 4 is making great progress in training and will have agentic capabilities.
• Zuckerberg said he believes 2025 to be the year when it will become possible to build an AI engineering agent that has coding and problem-solving abilities of a mid-level engineer, an historic milestone that over time can be a very large market.
• He pointed out that they have some fun surprises that people will likely like.
• CFO Susan Li said Meta AI now has more then 700 million monthly actives.
• Zuckerberg said (Q&A) that he doesn't think that 2025 will be an year when we will see extensive usage of an AI agent. "I don't think you're going to see this year like an AI engineer that is extremely widely deployed, changing all of development. I think this is going to be the year where that really starts to become possible and lays the groundwork for a much more dramatic change in '26 and beyond," he said.
• Zuckerberg said (Q&A) that he continues to be optimistic about Open Source and thinks that it's working. He said that the news on DeepSeek have strengthened their conviction.
• Zuckerberg said (Q&A) that they are still digesting a number of novel things that DeepSeek did and are hoping to implement a number of advances they made in their model.

Q4 results and 2025 outlook

• Li said Q4 expenses benefitted from a 13% favorable impact legal accrual reductions and year over year reduction in restructuring costs.
• Online commerce vertical was the largest contributor to year over year growth in ad revenue.
• Ad revenue growth was strongest in Rest of World (27%), followed by Asia-Pacific (23%), Europe (22%) and North America (18%).
• Ad impressions (which rose 6%) was mainly driven by Asia-Pacific.
• Average price per ad (which increased 14%) was mainly driven by increased advertiser demand, in part driven by improved ad performance but offset by impression growth, particularly from lower monetizing regions.
• Cost of revenue rose 15% driven mostly by higher infrastructure costs.
• Li said global video time grew by double-digit percentage rate year over year in Instagram in Q4, and they are seeing particular strength in the US.
• Video time on Facebook also grew by double-digit rates y/y in Q4.
• Li said that they see continued opportunities to drive video growth in 2025 through ongoing optimizations.
• Li said Reels are being reshared over 4.5 billion times a day.
• Li pointed out that they see impression growth opportunities over the long term through unmonetized surfaces like Threads.
• Li said Threads ads is unlikely to be a meaningful driver of overall impression and revenue growth in 2025.

Capital expenditure and total expenses

• Li said they are pursuing capital efficiency by extending the useful life of their servers and related equipment and that this will enable them to use their " non-AI and AI servers for a longer period of time before replacing them, which we estimate will be approximately 5.5 years." However, the capex and depreciation savings from this efficiency program have already been included in their guidance.
• They are also pursuing efficiency by deploying their custom MTIA silicon in areas where they can achieve a lower cost of compute.
• The focus continues to be adding technical support. Li said in Q4, nearly 90% of their year-over-year headcount growth was within the R&D function, the remaining went to infrastructure headcount.
• Li said their efficiency focus in the last two years has led to significant improvement in internal processes and developer tools. She said they now have an AI-powered coding assistant, which enables developers to write codes faster.
• Zuckerberg said it's too early to have a strong opinion on the trajectory of infrastructure and Capex following DeepSeek's news but he thinks that investing heavily on them is going to be a strategic advantage over time. He thinks that the cost of Ai might shift in future from pre-training the model to inference. He also noted that they will implement AI in their core products ( feeds and ad products) which are used by billions of people, and that will be costly.

Advertising

• Li said (Q&A) they continue to see healthy cost per action trends for advertisers.
• Li pointed out (Q&A) that they haven't seen any noticeable impact from their content policy changes on advertiser spend.
• Li said (Q&A) that they continue to see strong advertiser demand.

Ad ranking and recommendation system

• Li said the Andromeda they launched in the second half of 2024, which boosts the ranking process has led to an 8% increase in the quality of ads that they show to people.
• Li said the adoption of Advantage+ shopping campaigns continues to grow. "Adoption of Advantage+ shopping campaigns continues to scale, with revenue surpassing a $20 billion annual run-rate and growing 70% year-over-year in Q4," she said.
• As a result of the strong performance and interest of Advantage+ Shopping, they are testing a new format that will ensure Advantage+ is turned on from the beginning.
• Li said more than 4 million advertisers are now using one of their generative AI ad creative tools, up from one million six months ago.
• Li said their Image Animation tool launched in October has received great adoption, with hundreds of thousands of advertisers using it monthly.

Family of Apps

• Zuckerberg said he expects Threads to have over one billion users over the next several years.
• Zuckerberg said Threads now has 320 million monthly actives and is adding 1 million sign-ups per day.
• Zuckerberg said WhatsApp now has more than 100 million monthly actives in the US.
• Zuckerberg said he thinks there are a lot of opportunities to make Facebook more culturally influential and that this will be one of his focus areas this year.
• Li said WhatsApp continues to see the strongest usage of Meta AI.

Reality Labs

• Zuckerberg said 2025 will be a year when they will determine if Ray-Ban Meta AI glasses will have "many hundreds of millions and eventually billions of AI glasses and become the next computing platform" or if it's just going to be another longer grind.
• He said the number of people using Quest and Horizon has been growing steadily and they will also know a lot more about Horizon's trajectory at the end of the year.

Year of intensity

• Zuckerberg reiterated his earlier comments that 2025 is going to be a big year for them since the trajectory of most of their long-term investments will become a lot clearer.

Trump's administration

• Zuckerberg is optimistic about Trump's administration. "We now have a U.S. administration that is proud of our leading companies, prioritizes American technology winning, and that will defend our values and interests abroad. And I'm optimistic about the progress and innovation this is can unlock," he said.

Management expectations and analysts estimates

Management guidance

Key Items	Q4 2024						2024
	Lower-point	Y/Y	Mid-point	Y/Y	Upper-point	Y/Y	Lower-point	Y/Y	Mid-point	Y/Y	Upper-point	Y/Y
Revenue	$45.0 billion	12.2%	$46.5 billion	15.9%	$48.0 billion	19.7%
Total expenses							$96.0 billion	8.9%	$97.0 billion	10.0%	$98.0 billion	11.2%
Capital expenditure							$38.0 billion	35.2%	$39.0 billion	38.8%	$40.0 billion	42.3%

Notes:

• Management's guidance for year over year revenue growth assumes foreign currency is approximately neutral, based on exchange rates at the time of the update.
• Management expects 2024 Reality Labs operating losses to increase meaningfully year over year.
• Management expect significant capital expenditures in 2025.
• Management expect a significant increase in infrastructure expenses in 2025 since higher depreciation and operating expenses will be recognized.
• It expects Q4 tax rate to be in the low-teens as long as there won't be any changes to the tax landscape.

Analysts estimates

Key Items	Q4 2024	Y/Y	Q1 2025	Y/Y	2025	2026	2027
Revenue	$46.97 billion	17.10%	$41.79 billion	14.65%	$186.65 billion
EPS	$6.73	26.27%	$5.40	14.60%	$25.36
Family Daily Active People	3.33 billion	4.4%
Ad revenue	$45.82	18.75%
Revenue- Reality Labs	$1.13 billion	6.0%	$502 million		$2.64 billion	$3.32 billion	$4.64 billion
Reality Labs operating loss	$-5.12	-10%	$-4.34 billion		$-19.49 billion	$-20.55 billion	$-19.48 billion
Operating margin	42.6%
Ad impressions		10.1%
Average price per ad		7.33%
Capex	$15.43 billion	103%	$12.33 billion		$52.15 billion	$57.24 billion	$59.26 billion

Earnings revisions at Seeking Alpha in the last three months

Key Items	Q4 2024		2024
	Up revisions	Down revisions	Up revisions	Down revisions
Revenue	38	6	55	6
EPS	39	3	58	0

Visible Alpha insights on earnings estimates

• Estimates for capex in Q1 and full year 2025 have been moving higher.
• Estimates for Family of Apps and the Reality Labs revenue for Q4 have not changed since October due to continued strength in DAU performance across geographies, especially in the US and Europe.

Analysts opinions and insights

Digital ad spending was strong during the quarter

• According to a survey by Wedbush, ad spending was strong during the quarter. 49% of 200 US-based marketers said they increased their digital ad spend by 10% year over year. In Q3, 43% of the marketers had reported the same level of growth. The report notes that 54% of markers that use Meta said they increased their spend by more than 10% year-on-year in Q4, up from 40% in Q3. "Our survey work indicates strong [year-over-year] growth in [the fourth quarter] and an improvement in advertiser sentiment versus our [third quarter] survey," the analysts said. The analysts pointed out that expectations for Q1 indicate a "relatively stable" uptick in ad spending, with 48% of advertisers planning to increase their ad budgets by 10% or more.

Meta will likely report a strong quarter

• Buy, $700: Truist expect Meta's Q4 revenue to top the upper end of management's guidance due to sustained demand momentum boosted by great products.

Meta could report mixed Q4 earnings

• Overweight, $655->$700: KeyBanc expects a mixed earnings season for the likes of Meta as long-term tailwinds collide with near-term headwinds. The analysts said misses due to FX may create buying opportunities.

Engagement across Meta Platforms continue improving

• Overweight, $650->$670: Piper Sandler said teen engagement in Instagram and Facebook has been improving, which is "impressive" considering Meta's scale and existing brand.

Meta Platforms is gaining ad market share

• Overweight, $600->$660: DT Cowen said their ad survey indicates that Facebook and Instagram share of world-wide digital advertising could rise from 29% in 2024 to 32% by 2029, but partially offset by modest Facebook share loss.

Cautious outlook for Q1

• Overweight, $641->$685: Wells Fargo said Q1 has the possibility to disappoint. The analysts said they adjusted their estimates downwards due to weaker FX and more mixed exit rate to Q4 advertising growth.
• Overweight, $730->$720: Cantor Fitzgerald said there are concerns about Meta's Q1 2025 and financial year 2025 guidance, attributed to foreign exchange-related factors. The firm, however, thinks that this could be overshadowed by the strong performance associated with core advertising.
• Buy, $660->$710: Bofa said it lowered its 2025 revenue and EPS estimate by 2% to $183 billion and $25.32 respectively due to US dollar appreciation.

AI could sustain advertising revenue growth in 2025

• Outperform, $650->$750: JMP Securities believes AI could sustain Meta's advertising revenue growth in 2025 as it gets integrated deeply.

GenAI tools to boost Meta revenue in 2025

• William Blair analyst Ralph Schackart told clients that Meta Platforms is currently offering GenAI tools to businesses on WhatsApp in a testing phase in selected countries while charging 2.5 cents per conversation every 24 hours. Since WhatsApp has 2.7 billion users, Schackart said these chatbots could deliver incremental revenue of $16.6 billion in 2025 and up to $45 billion by 2030.

Uncertainty around TikTok is beneficial for Meta

• Buy, $753: Analyst Ronald Josey of Citi said Meta is well positioned to capitalize on the current uncertainty around TikTok. He pointed out that advertisers are beginning to shift their focus away from TikTok.
• Bofa said the TikTok uncertainty will be beneficial to Meta. "At the very least, TikTok is subject to some ad sales disruption if there is a change in ownership of the company," Analyst Post said. "In case of any disruption to TikTok operations in the U.S., we see usage and ad spend shift benefit for Meta."

2025 will mark a crucial year for GenAI commercialization

• Strong buy, $675->$725: Raymond James said 2025 GenAI assistants could mitigate capital expenditure concerns as their use cases is felt across consumer, enterprise software and HardTech applications.

Investor focus has shifted to capital expenditure in 2025

• Outperform, $680->$700: Wedbush said investor focus has shifted to capital expenditure in 2025. The research firm expect capital expenditure of $52.9 billion in 2025. “We estimate total expense growth of 14% [year on year] in 2025, accelerating modestly from 10% in 2024,” analysts said. Wedbush pointed out that risks around capital expenditure are limited given the recent announcements around headcount, which indicates that Meta is committed to cost discipline despite AI investment.
• Bofa said capital expenditure which is expected to reach $58 billion in 2025 will be an essential factor to watch.

Advertising spend and pricing insights

Revealbot data indicates that Meta Platforms CPM rose sharply during the quarter

• Birch (formely Revealbot) data indicates that Instagram CPM rose by around 21.8% quarter over quarter and 32.0% year over year in Q4 to an average of $14.46.
• Similarly, the data indicates that Facebook CPM was up by around 32.1% quarter over quarter and 32.1% year over year to an average of $14.35 during the quarter.

Rockerbox 2024 insights indicate that total media spend was lower year over year during Black Friday and Cyber Monday

• According to Rockerbox, total media spend during Black Friday and Cyber Monday was 10% lower in 2024 compared to 2023 (min 3:57).
• Meta CPM was stable throughout 2024 (min 10.03).
• Rockerbox is a marketing measurement solution firm that tracks over $5.9 billion in advertising spend across channels such as Meta Platforms, Google and TikTok
  

Insights on video unification

• According to sensor Tower, Facebook's video unification efforts are paying off. Sensor Tower pointed out that time spent on Reels in December 2024 rose 17% from January 2024, indicating that millions of engagement hours are moving to the feature over the period in which Facebook's unification efforts began.

Insights on the US dollar

• Over the past three months, the US dollar index has appreciated by about 6% versus its average trading level in 2024. If the trend continues in 2025, it could lead to an headwind of around $4 billion, based on Meta's 2023 advertising revenue outside US of about $70 billion (53% of $132 billion).

Source: Seeking Alpha