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Meta Platforms:Quarterly Results/2024 Q2: Difference between revisions
Meta Platforms:Quarterly Results/2024 Q2 (view source)
Revision as of 14:49, 1 August 2024
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== Earnings Call Summary == | == Earnings Call Summary == | ||
Here is the: [https://events.q4inc.com/attendee/583765285 Earnings Webcast Call] | [https://s21.q4cdn.com/399680738/files/doc_financials/2024/q2/META-Q2-2024-Earnings-Call-Transcript.pdf Earnings Call Transcript] | [https://s21.q4cdn.com/399680738/files/doc_financials/2024/q2/META-Q2-2024-Follow-Up-Call-Transcript.pdf Follow-up Call Q&A Transcript] | |||
=== AI === | === AI === | ||
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* Zuckerberg said that in the past open compute was able to save them billions. | * Zuckerberg said that in the past open compute was able to save them billions. | ||
* '''Zuckerberg pointed out that Llama 4 will use 10x more compute than Llama 3, adding that he rather invest now than wait until they are too late. "The amount of compute needed to train Llama 4 will likely be almost 10 times more than what we used to train Llama 3, and future models will continue to grow beyond that. It's hard to predict how this trend -- how this will trend multiple generations out into the future. But at this point, I'd rather risk building capacity before it is needed rather than too late, given the long lead times for spinning up new inference projects."''' | * '''Zuckerberg pointed out that Llama 4 will use 10x more compute than Llama 3, adding that he rather invest now than wait until they are too late. "The amount of compute needed to train Llama 4 will likely be almost 10 times more than what we used to train Llama 3, and future models will continue to grow beyond that. It's hard to predict how this trend -- how this will trend multiple generations out into the future. But at this point, I'd rather risk building capacity before it is needed rather than too late, given the long lead times for spinning up new inference projects."''' | ||
* CFO Susan Li said people have used Meta AI for billions of queries since launching it. | * CFO Susan Li said people have used Meta AI for billions of queries since launching it. | ||
* Li said they believe that over time Gen AI will play a growing role with how businesses engage with customers. '''"Looking forward, we believe Generative AI will play a growing role in how businesses market and engage with customers at scale. We expect this technology will continue to make it easier for businesses to develop customized and diverse ad creatives. We've seen promising early results since introducing our first Generative AI ad features, image expansion, background generation, and text generation with more than 1 million advertisers using at least one of these solutions in the past month."''' | * Li said they believe that over time Gen AI will play a growing role with how businesses engage with customers. '''"Looking forward, we believe Generative AI will play a growing role in how businesses market and engage with customers at scale. We expect this technology will continue to make it easier for businesses to develop customized and diverse ad creatives. We've seen promising early results since introducing our first Generative AI ad features, image expansion, background generation, and text generation with more than 1 million advertisers using at least one of these solutions in the past month."''' | ||
* Zuckerberg said it's still early to see results on Meta AI. | * Zuckerberg said it's still early to see results on Meta AI. | ||
* Li said they don't expect GenAI to be a meaningful driver of revenue in 2024. | * Li said they don't expect GenAI to be a meaningful driver of revenue in 2024 or 2025. | ||
=== Q1 Results and future outlook === | === Q1 Results and future outlook === | ||
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* Family of Apps other revenue rose 73% y/y driven mostly by business messaging revenue growth from WhatsApp Business. | * Family of Apps other revenue rose 73% y/y driven mostly by business messaging revenue growth from WhatsApp Business. | ||
* Instagram Reels engagement continues to grow as they make enhancements to their recommendations system, CFO Susan Li said. | * Instagram Reels engagement continues to grow as they make enhancements to their recommendations system, CFO Susan Li said. | ||
* '''Li said their investments on AI are informed by returns they have seen or expect to achieve across the platforms. "Our ongoing investment in core AI capacity is informed by the strong returns we've seen and expect to deliver in the future, as we advance the relevance of recommended content and ads on our platform. While we expect the returns from Generative AI to come in over a longer period of time, we’re mapping these investments against the significant monetization opportunities that we expect to be unlocked across customized ad creative, business messaging, a leading AI assistant and organic content generation."''' | |||
* '''Susan Li said ad market continues to be healthy and that they will be lapping strong comps in Q3 (Q&A). "We are continuing to see healthy global advertising demand, and we are also delivering ongoing ad performance improvements just related to all of the investments that we've continued to make over time. And improving the sort of ads, targeting ranking, delivery, all of the fundamental infrastructure there. And we expect that all of that will continue to benefit ad spend in Q3. We do expect year-over-year growth to slow in Q3, as we are lapping strong growth from China-based advertisers, as well as strong Reels impression growth from a year ago. And we also expect modestly larger FX headwinds in Q3 based on current rates."''' | |||
* '''Li said the expect broad-based strength seen in Q2 to develop again in Q3 (Q&A). " And we saw basically in Q2 where revenue grew 22% that there was broad-based strength across regions and verticals including particular strength among smaller advertisers, and we expect that generally to continue into Q3."''' | |||
* Li pointed out that they continue to be disciplined on headcount but they expect it to be meaningfully higher in 2024 than in 2023- due to the headcount underrun as a result of prolong hiring freeze in 2023 (FQ&A). | |||
* Susan Li said they will build their infrastructure with flexibility in mind (Q&A). '''"We are continuing to build our AI infrastructure with fungibility in mind, so that we can flex capacity where we think it will be put to best use. The infrastructure that we build for gen AI training can also be used for Gen AI inference. We can also use it for ranking and recommendations by making certain modifications like adding general compute and storage. And we are also employing a strategy of staging our data center sites, at various phases of development, which allows us to flex up to meet more demand and less lead time if needed while limiting how much spend we are committing to in the outer years."''' | |||
* Zuckerberg said they will continue being committed to operational efficiency across the company as they scale AI investments. | |||
* '''Li said in the follow-up call that they feel good about the pricing trends. "We feel good about the cost per action trends we're seeing. We think that those are healthy."''' | |||
* '''Li said in the follow-up call that their compute needs currently outstrip the available data centres and they have had to shift capacity around to free up capacity for GenAI training and that leads to foregone revenue but they have factored that in Q3 guidance. "Our compute needs outstrip our available data center capacity right now...We've also had to do a little bit of shifting capacity around to free up capacity for GenAI training. And altogether, we expect that that will result in some foregone revenue growth from ads and organic content ranking improvements that we would have otherwise made, but that has been factored into our Q3 outlook. And we generally expect this to be to be a near term dynamic until we start bringing additional data center capacity online next year, which will meet our capacity needs."''' | |||
* '''Li said in the follow-up call that the incremental revenue from ads business this year and next year is primarily a function of core AI work. "The incremental revenue that you see this year and largely next year, coming from the ads business, that will primarily be a function of the investments that we have been making in the core AI work that goes into the ongoing ads performance improvements as we make our ranking, delivery, targeting, et cetera systems, more performant over time."''' | |||
* '''Li said in the follow-up call that they shared last time that two-thirds of their China ad revenue comes from advertisers outside the top 10 spenders in China in 2023. "We don't have an update on that for this year, but I would say it continues to be a diverse advertiser base. And more broadly, I think we are continuing to see a longer-term trend of growth from China-based advertisers...And again, most of our China-based ad revenue continues to come from a longer tail of advertisers," she added.''' | |||
* Li said in the follow-up call that G&A expenses included the settlement with the state of Texas. | |||
=== '''Advertising and recommendation systems''' === | |||
* Li said they are increasingly becoming better at determining the best ads to show and when to show, hence enabling them to drive revenue conversions without growing the number of ad loads. | * Li said they are increasingly becoming better at determining the best ads to show and when to show, hence enabling them to drive revenue conversions without growing the number of ad loads. | ||
* Li highlighted a study conducted this year that showed 22% higher-return on ad spend by adopting Advantage+ Shopping campaigns. | * Li highlighted a study conducted this year that showed 22% higher-return on ad spend by adopting Advantage+ Shopping campaigns. | ||
* | * VP Chad Heaton said in the follow-up call that they currently don't have opportunities for ramping up Reels ad load significantly as they did last year but they will be focusing on optimizing the level of ads. | ||
=== Family of Apps === | === Family of Apps === | ||
* Growth in U.S has been a bright spot. Efforts that they started a few years ago on focusing their apps more on the 18 to 29 year olds are driving good results. | * Growth in U.S has been a bright spot. Efforts that they started a few years ago on focusing their apps more on the 18 to 29 year olds are driving good results. | ||
* '''"We have seen healthy growth in young adult app usage in the US and Canada for the past several quarters. And we have seen that products like Groups and Marketplace have seen particular traction with young adults," CFO Susan Li said (Q&A).''' | |||
* '''Threads is now about to hit 200 million monthly actives'''. | * '''Threads is now about to hit 200 million monthly actives'''. | ||
* WhatsApp now serves more than 100 million monthly actives in the U.S. | * WhatsApp now serves more than 100 million monthly actives in the U.S. | ||
* Zuckerberg signaled that they will not start monetizing Threads until it hits a billion users (Q&A). " Threads, I think it is another example of something that it got off to about as good of a start of any app that I can think of. I think, it was the fastest growing app to 100 million people. And it is a good reminder that even when you have that start, the path from there to 1 billion people using an app is still multiple years. And that's our product cycle... So I think that's something that our investors and folks thinking about analyzing the business, if needed to always grapple with, is all these new products, we ship them and then there is a multiyear time horizon between scaling them and then scaling them into not just consumer experiences but very large businesses." | * Zuckerberg signaled that they will not start monetizing Threads until it hits a billion users (Q&A). " Threads, I think it is another example of something that it got off to about as good of a start of any app that I can think of. I think, it was the fastest growing app to 100 million people. And it is a good reminder that even when you have that start, the path from there to 1 billion people using an app is still multiple years. And that's our product cycle... So I think that's something that our investors and folks thinking about analyzing the business, if needed to always grapple with, is all these new products, we ship them and then there is a multiyear time horizon between scaling them and then scaling them into not just consumer experiences but very large businesses." | ||
* Li said (Q&A) shop ads y/y growth rate is strong and is driving incremental performance for advertisers. | |||
=== Metaverse === | === Metaverse === | ||
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* '''Zuckerberg said Ray-Ban Meta Glasses continue to be a bigger hit sooner than expected, thanks in part to AI. That demand is still outpacing their supply.''' | * '''Zuckerberg said Ray-Ban Meta Glasses continue to be a bigger hit sooner than expected, thanks in part to AI. That demand is still outpacing their supply.''' | ||
* Quest 3 sales are also exceeding Meta's expectations. | * Quest 3 sales are also exceeding Meta's expectations. | ||
* <br /> | * Mark Zuckerberg said EssilorLuxottica is doing better-than expected in delivering the mandates of their partnership and that they are now in the second generation of the Ray-Ban Meta glasses. | ||
* '''Susan Li said in the follow-up call that they are shifting the investment focus towards AR. "Within that envelope, we are certainly seeing that we are shifting some energy towards AR glasses in particular. I think the traction that we have seen with the Ray-Ban Meta glasses and the product market fit and demand for the product out of the market, and the overlap with our AI efforts where the glasses form factor is really such an intuitive way to bring an AI assistant with you around that sees what you see and hears what you hear."'''<br /> | |||
== Management expectations and analysts estimates == | == Management expectations and analysts estimates == | ||