Meta Q3 2024 Earnings Analysis
Dive into $META Meta’s Q3 2024 earnings with review of financial performance, key metrics, operating expenses, dilution, customer growth, future outlook
Financial Results:
↗️$40,589M rev (+18.9% YoY, +22.1% LQ) beat est by 0.8%
↗️GM (81.8%, +0.0 PPs YoY)
↗️Operating Margin (42.7%, +2.5 PPs YoY)🟢
↘️FCF Margin (38.2%, -1.7 PPs YoY)🟡
↗️Net Margin (38.7%, +4.7 PPs YoY)🟢
↗️EPS $6.03 beat est by 15.1%🟢
Segment Revenue
➡️Family of Apps $40,319M rev (+18.8% YoY, 54.0% Operating Margin)🟡
↗️Reality Labs $270M rev (+28.6% YoY, -1640.0% Operating Margin)🟢
➡️Advertising $39,885M rev (+18.6% YoY)🟡
↗️Other revenue $434M rev (+48.1% YoY)
KPI
➡️Family daily active people (DAP) $3.3B on average (+0.6% YoY)
➡️Family Average Revenue per Person (ARPP) $12.3B (+12.4% YoY)
Revenue by Geography
➡️US & Canada $17,609M (+15.9% YoY, 43.4% of Rev)
↗️Europe $9,492M (+22.1% YoY, 23.4% of Rev)
➡️Asia-Pacific $8,220M (+18.6% YoY, 20.3% of Rev)
↗️Rest of World $5,268M (+23.9% YoY, 13.0% of Rev)
Operating expenses
↘️S&M/Revenue 7.0% (-1.5 PPs YoY)
↗️R&D/Revenue 27.5% (+0.5 PPs YoY)
↘️G&A/Revenue 4.6% (-1.5 PPs YoY)
Headcount
↗️72,404 Total Headcount (+9.4% YoY, +1605 added)
Dilution
↘️SBC/rev 10%, -1.3 PPs QoQ
↘️Basic shares down -1.8% YoY, -0.5 PPs QoQ🟢
↘️Diluted shares down -1.6% YoY, -1.5 PPs QoQ🟢
Guidance
➡️Q4'24 $45,000.0 - $48,000.0M guide (+15.9% YoY) in line with est
Key points from Meta’s Third Quarter 2024 Earnings Call:
Revenue and Financial Performance
Meta Platforms posted Q3 2024 revenue of $40.6 billion, a 19% increase year-over-year (20% on a constant currency basis). Total expenses rose by 14% YoY to $23.2 billion, primarily due to higher infrastructure and R&D costs. Operating income was $17.4 billion, with a 43% operating margin and a 12% tax rate. Free cash flow remained robust at $15.5 billion, supported by $70.9 billion in cash and marketable securities. Looking forward, Meta projects Q4 revenue between $45 billion and $48 billion.
AI-Integrated Meta Ray-Ban Glasses
Meta’s new Ray-Ban glasses incorporate real-time AI, allowing users to take photos, make calls, listen to music, and access Meta AI. The glasses offer features like real-time translation and personalized suggestions, with high demand for the “clear edition” leading to sellouts and high secondary market prices.
Quest 3 Mixed Reality Headset
The Quest 3 headset launched at $300, offering high-quality color pass-through and an updated chipset. Positioned as a key holiday product, Quest 3 has received positive early reviews for its accessibility and technology enhancements.
Llama and Meta AI Expansion
Meta AI reached 500 million monthly active users, enhancing engagement across Meta’s platforms. This quarter, Meta introduced Llama 3.2, an efficient open-source model aimed at enterprise and public sector use, while Llama 4 is under development with expected improvements in reasoning, speed, and modality.
Threads Growth and Development
Threads, Meta’s text-based social app, reached nearly 275 million monthly active users, gaining over a million sign-ups daily. Meta aims to continue enhancing the platform, solidifying Threads as a core component of its app ecosystem.
Ad Revenue and Monetization
Ad revenue for Q3 totaled $39.9 billion, up 19% YoY, driven by demand in e-commerce, healthcare, and media. Ad impressions grew 7%, and the average ad price rose 11% due to enhanced ad performance. Improved AI-driven recommendations led to an 8% increase in time spent on Facebook and 6% on Instagram. New ad technologies also helped advertisers better anticipate audience responses, resulting in a 2-4% rise in conversions.
WhatsApp Growth
WhatsApp remains a robust growth driver, especially with the click-to-message feature performing well in key markets like Brazil. Paid messaging revenue saw substantial growth, contributing to a 48% increase in family of apps' other revenue. Meta is also expanding WhatsApp’s U.S. presence to capture additional monetization opportunities.
Reality Labs
Reality Labs revenue rose 29% YoY, primarily from hardware sales. However, the segment recorded a $4.4 billion operating loss as Meta continues to invest in augmented reality and wearables. Strong demand for Ray-Ban Meta glasses and progress with the Quest 3 headset highlight Meta’s ongoing commitment to advancing its AR and VR technologies.
Daily Active Users and Engagement
Meta’s app ecosystem surpassed 3.2 billion daily active users in Q3 2024, with steady engagement across Facebook, Instagram, WhatsApp, and Threads. Meta AI and Llama have gained traction across various use cases, further fueling user interaction within the ecosystem.
CAPEX and Future Investments
Meta expects 2024 capital expenditures to range from $38 billion to $40 billion, with further infrastructure growth planned for 2025. In Q4, Meta will increase server and data center investments, with CAPEX focused on expanding AI infrastructure, especially for models like Llama. These investments will support Meta’s broader AI-driven initiatives and Reality Labs.
Advertising Enhancements
Meta’s advertising platform saw the average price per ad grow 11%, driven by improved ad performance and demand. Meta optimized ad placement on lower-monetized video surfaces and introduced generative AI tools for ad creation, showing early success in enhancing advertiser retention and performance.
Challenges
Meta faces challenges in balancing high CAPEX demands with profitability, particularly as Reality Labs continues to operate at a significant loss. Regulatory pressures in the U.S. and EU also pose ongoing risks. Regionally, ad revenue growth in Asia-Pacific has slowed, attributed to reduced demand from China.
Future Outlook
For Q4 2024, Meta forecasts revenue between $45 billion and $48 billion. In 2025, Meta anticipates significant growth in infrastructure and AI investments. Future growth strategies include the development of Llama 4, new advertising formats, and augmented reality initiatives. Meta remains committed to improving engagement, expanding AI-driven monetization, and positioning WhatsApp for enhanced revenue generation in the U.S. market.
Management comments on the earnings call.
Product Innovations
Mark Zuckerberg, CEO
“Our advancements in AI-powered Meta Ray-Ban glasses and the Quest 3 mixed reality headset demonstrate our commitment to shaping the future of wearables and immersive technology. We are focused on delivering AI-driven experiences that not only enhance functionality but seamlessly integrate into daily life.”
Daily Active Users and Engagement
Mark Zuckerberg, CEO
“With over 3.2 billion daily active users across our platforms, we are seeing steady growth driven by high engagement on Facebook, Instagram, WhatsApp, and Threads. Our AI enhancements have contributed to significant increases in time spent on our core apps, which strengthens our overall ecosystem.”
Reality Labs
Susan Li, CFO
“Reality Labs remains one of our most significant long-term investments. While we’re continuing to operate at a loss, our progress in augmented reality wearables, such as the Ray-Ban Meta glasses and Quest 3 headset, highlights the demand and interest we see in these technologies as we move closer to mainstream adoption.”
Advertising
Susan Li, CFO
“Our ad platform has shown an 11% rise in the average price per ad, reflecting improved ad performance and higher advertiser demand. By optimizing ad placements across Facebook and Instagram, we’re enhancing both user engagement and conversion rates for our advertisers, making ads more effective without increasing the ad load.”
Llama
Mark Zuckerberg, CEO
“Our open-source Llama models are accelerating industry-wide adoption and allowing us to deliver AI applications at scale. The advancements with Llama 3.2 and upcoming Llama 4 will support more powerful reasoning, speed, and new modalities, positioning us as a leader in AI-driven innovation.”
CAPEX
Susan Li, CFO
“We are investing heavily in infrastructure, with 2024 capital expenditures projected between $38 billion and $40 billion and additional growth planned for 2025. A significant portion of our CAPEX will support the scaling of AI infrastructure, especially for models like Llama, to meet the demand for advanced AI capabilities.”
International Growth
Susan Li, CFO
“Growth in ad revenue has been particularly strong in regions like Europe and the ‘Rest of World’ segment. We’re continuing to scale our business messaging capabilities globally, especially with the click-to-WhatsApp feature, which is seeing high adoption in markets such as Brazil.”
Challenges
Mark Zuckerberg, CEO
“We face the complex challenge of balancing high CAPEX needs with profitability. Regulatory pressures in key markets like the U.S. and EU remain significant, and we are also navigating slower ad revenue growth in regions like Asia-Pacific, reflecting broader shifts in advertiser demand.”
Future Outlook
Mark Zuckerberg, CEO
“Our roadmap for 2025 centers on growth in AI infrastructure, new advertising formats, and augmented reality advancements. By investing in these areas, we are positioning ourselves to drive meaningful engagement, expand monetization opportunities, and capture new markets over the coming years.”