Meta's Q1 earnings aren't too exciting but road ahead is
What's the story
Meta has had a tumultuous time over the past year. Falling revenue, multiple rounds of layoffs, and restructuring defined a frenzied year for the firm. However, the company's results for the first quarter of this year indicate a change that may not be as exciting as Alphabet or Microsoft's, but it shows the company is reinventing itself. The road ahead is exciting for Meta.
Context
Why does this story matter?
The tech sector, as a whole, has been struggling since mid-2022. Both tech giants and start-ups have fallen victim to the economic slowdown. Meta was among the worst affected. The company had to fight macroeconomic headwinds, TikTok, Apple, a fall in digital ad revenue, and most recently, its own employees. Considering all that, the quarterly results are a massive boost for the company.
Results
Meta's profit fell by 24% year-over-year
In the first quarter of this year, Meta recorded a revenue of $28.6 billion, up by 3% year-over-year. The company surpassed Wall Street's expectations and its own guidance. Profit, however, fell by 24% year-over-year to $5.7 billion. The net income was affected by multiple restructuring efforts of the firm. The tech giant has laid off around 21,000 employees so far.
Facebook's daily active users grew by 4%
Meta's surprising increase in revenue was driven by growth in users. Facebook saw its user base grow by 37 million daily users, up by 4% year-over-year. This is a massive turnaround for the platform, which reported a first-ever decline in users in early 2022. Facebook's monthly active users also saw a 2% year-over-year jump to 2.99 billion.
Reels
Time spent on Instagram increased by over 24%
One of Meta's biggest concerns has been how TikTok took advertising dollars from its coffers. The company began focusing on Reels as a way to hinder TikTok's advance. It seems Meta's efforts have been paying off. According to Mark Zuckerberg, time spent on Instagram, where Reels are the main focus, increased by over 24%. All thanks to TikTok-like AI-powered content recommendations.
AI infrastructure
Meta has been focusing more on AI
Speaking of AI, Meta has been late to enter the AI race, courtesy of its love for the metaverse. However, the company has recently poured billions of dollars to build infrastructure that can support AI features. In his earnings call, Zuckerberg said, "We are no longer behind in building our AI infrastructure." Meta released an AI model dubbed LLaMA earlier this year.
Generative AI
Generative AI will touch every Meta product: Zuckerberg
LLaMA, however, is not ChatGPT, OpenAI's famous chatbot. But that won't be the case forever. Zuckerberg said generative AI is "literally going to touch every single one of our products." He specifically hinted at how AI agents can improve WhatsApp's customer support business. He said it will increase the number of businesses "that can afford to have people engaging in chat."
Challenges
Meta's costs increased by 10% in the last quarter
As inspiring as Meta's results are, the company is still facing multiple challenges. For instance, its costs in the last quarter grew 10% to $21.4 billion. Out of this, $1.1 billion was related to restructuring. Add to that, the company is still fascinated with the metaverse. Zuckerberg hopes Meta's investments in AI will boost its metaverse ambitions.
Road ahead
The earnings report holds promise for Meta's future
It is unclear how the firm's metaverse ambitions will turn out, especially considering the lack of excitement around the technology. Meta's investors must be still wary of that. However, the focus on AI should reap results for the company. Its earnings report is not awe-inspiring by any metric, but it holds a lot of promise for the tech giant's future.