Table of Contents
a. Key Points
Fastest quarterly revenue growth rate in 5 years.
Raised annual CapEx guidance by $10 billion.
Daily user growth was held back by 2 geopolitical items.
Upgraded Meta AI is performing very well.
b. Demand
Beat revenue estimate by 1.4% & beat guide by 2.4%. The 4 point foreign exchange (FX) tailwind was as expected. That was not the source of the beat.
This was its fastest overall revenue growth rate since the pandemic surge.
By geography:
UCAN revenue missed estimates by 4.2%.
Europe revenue beat estimates by 4%.
Asia-Pacific revenue missed estimates by 3.6%.
Rest of World revenue beat estimates by 4.5%.
By revenue bucket:
Overall Family of Apps (FOA) revenue beat estimates by 1.7%. Within this, other FOA revenue rose 74% Y/Y due to strong WhatsApp paid messaging and subscriptions like Meta Verified.
Reality Labs (FRL) revenue missed estimates by 21%.
Ad impressions rose 19% Y/Y compared to 16% growth expectations. The beat was due to ad load optimization and strong engagement.
Ad pricing rose 12% Y/Y, which met expectations. This was due to a better macro backdrop vs. last year. This was offset by faster growth in lower revenue per user regions.
Missed daily active people (DAP) estimate by 1.4%.
The small decline in sequential DAPs and the DAP miss vs. consensus was related to two things: Iran and Russia restricting WhatsApp access. Growth was positive across every app excluding these items while engagement reached new highs.
c. Profits
Beat EBIT estimate by 17.3%.
OpEx rose by 35% Y/Y mainly due to higher infrastructure-related depreciation and employee compensation.
Headcount fell by 1% Y/Y (but expensive hiring for the AI team)
Beat $6.82 GAAP EPS estimate by $0.49 ex-tax benefit. This is despite a -$1.1B equity investment loss during the quarter.
Sharply beat FCF estimate due to a large tax benefit. For context, its tax rate was -23% due to a $8B benefit related to changing U.S. tax policy.
Y/Y EPS growth excludes large tax benefit from this quarter.
d. Balance Sheet
$81B in cash & equivalents.
$28.4B in equity investments.
$58.7B in debt.
Diluted share count fell by 1% Y/Y.
e. Guidance & Valuation
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