Written by | Tian Xiaomeng
Edit | Lee Shin Ma
题图 | IC Photo
The wind of large models has strengthened the confidence of Microsoft and Google, but it has beaten Meta back to the "prototype".
This week, U.S. stocks have released data for the new fiscal quarter. Among them, Google's revenue in the first quarter of fiscal year 2024 was $80.54 billion, exceeding market expectations of $79.04 billion, a year-on-year increase of 15%, and earnings per share were $1.89, exceeding market expectations by 25%. Microsoft's total revenue for the third quarter of fiscal 2024 was $61.86 billion, up 17% year-over-year, and its profit was $21.9 billion, up 20% year-over-year, and earnings per share were $2.94, beating Wall Street's expectations across the board.
Affected by the financial report, the former's stock price rose nearly 16% after hours, breaking through the 2 trillion market value mark, and the latter's stock price also rose 5% after hours.
After Meta announced its new quarterly results, its stock price performed mediocre.
Image source: Baidu Stock Exchange
In fact, Meta performed well in the first quarter of 2024, with revenue up 27% from $28.645 billion in the same period last year to $36.455 billion, exceeding analysts' average expectations of $36.16 billion, and net profit of $12.369 billion, up 117% year-on-year. In the words of Meta founder Mark Zuckerberg: "This is a great start to the year. ”
But investors are not buying it, because Zuckerberg said at the earnings conference that in order to accelerate the construction of AI infrastructure, Meta expects capital expenditures for the whole of this year to increase from the previous forecast of $300-37 billion to $350-40 billion, and capital expenditures will increase significantly in the next few years, and this investment may not see a return in the short term. What's even more terrifying is that in addition to burning money on AI, Meta said that it will also continue to burn money on the metaverse.
As we all know, in 2021, Zuckerberg made a desperate bet on the metaverse, and even renamed Facebook to Meta, and Zuckerberg was ridiculed by netizens for "not having a 'face'". Although the concept of "metaverse" is popular in 2021, VR/AR is regarded as the key to open the door to the metaverse, but there is still a lot of thunder and rain, and the market does not pay. Meta's Reality Labs business lost $10.19 billion in 2021 and $13.72 billion in 2022.
At the beginning of 2023, Zuckerberg set the tone for the company as a "year of efficiency", reducing operating costs by opening up sources and reducing expenditure, initiated a round of large-scale layoffs for the first time in the company's 18-year history, and also seized the development opportunities of AI, and the stock price rebounded.
But now Xiaozha, who is "resolutely" investing in the metaverse, has once again worried investors.
1. Is there any salvation for the metaverse?
From the perspective of revenue composition, Meta's revenue mainly comes from social media advertising revenue. In the first quarter of 2024, advertising revenue reached $35.635 billion, up 26.81% year-over-year, accounting for 98.9% of the total revenue of the App series, with the online commerce vertical contributing the largest growth, followed by games and entertainment and media.
Image source: Meta earnings report
In the first quarter of 2024, MetaFamilyBucket's average daily active users (DAP) were 3.24 billion, up 7.28% year-on-year and 1.57% quarter-on-quarter, while average revenue per user was $11.20, up 18.27% year-on-year.
Image source: Meta earnings report
This is inseparable from the blessing of AI. Zuckerberg revealed that about 30% of the posts on the current Meta feed are pushed by AI recommendation systems, and on Instagram, more than half of the content is recommended by AI. In addition, Meta has also created a variety of AI services, such as Meta AI, where users can ask any questions in Meta's apps and smart glasses, creator AI, which helps creators run communities and interact with fans, business AI, where businesses on Meta platforms can help customers shop and get customer support through AI, and in-house programming and development of AI, as well as hardware such as smart glasses.
"Revenue from AI tools such as Advantage+Shopping and Advantage+App Campaigns has more than doubled since last year. Zuckerberg highlighted the new version of Meta AI that Meta released last week, which is powered by Llama 3. Meta is starting to roll out Meta AI in select English-speaking countries, and it's progressing well, with tens of millions of users already trying it out and receiving positive feedback, with more languages to come in the coming months. Zuckerberg threatened that "Meta AI products will be the world's most used and highest-quality AI assistants."
Regarding the product strategy at this stage, Zuckerberg said that Meta is investing in expanding the scale of new products, but has not yet monetized them, and expects a multi-year investment cycle before fully expanding Meta AI, business AI, etc. to the desired profitable services. On the bright side, once new AI services are scaled up, Meta will be able to monetize effectively. Of course, while investing more, Meta will continue to carefully manage headcount and other expense growth across the company.
Another portion of Meta's revenue came from the Reality Labs business segment, which includes Meta VR and metaverse businesses, driven by Quest headset sales, with revenue of $440 million in the quarter, up 29.79% year-over-year. Capital expenditures for the Reality Labs business were $4.3 billion, down 1% year-over-year, nearly 10 times its revenue, primarily due to an operating loss of $3.846 billion as inventory-related valuation adjustments and restructuring costs offset the negative impact of higher employee-related expenses.
Despite the losses, Zuckerberg said the current financial report is as if the App family and Reality Labs are two completely separate businesses, but strategically they are essentially the same business, and Reality Labs' vision is to build a next-generation computing platform to a large extent.
On the eve of the earnings release, Meta is also opening up its ability to empower Meta Horizon OS to third-party hardware manufacturers, a move that will provide consumers with more choice and a larger ecosystem for developers. "Opening up our ecosystem and operating system will help the ecosystem grow faster. ”
Zuckerberg has said that "smart glasses are the ideal device for Meta AI", and we'll wait and see.
Second, make efforts in the video track
"The video is still a highlight. ”
Borrowing from TikTok, Instagram launched the "Reels" short video feature, which successfully attracted a large number of new users. "It's now over 150 million monthly active, and overall it's still on track that I'd like to see. Zuckerberg said.
Meta CFO Susan Li introduced at the earnings conference that the revenue from Reels products, whether it is Instagram or Facebook, is mainly driven by the increase in user engagement, as well as the improvement of business monetization efficiency, including ad ranking and performance.
"We have no plans to provide an outlook on the impact that Reels products may have on the company's revenue in the future, but we believe that the business will continue to contribute positively to the company's overall growth, and we are confident that we will continue to improve its performance and increase the supply of related products. ”
In fact, Meta has been investing in the field of short videos for many years. In 2018, Facebook at that time launched a short video standalone app similar to TikTok, Lasso, but the number of downloads of the app could not be compared with TikTok, and within four months of its launch, its US market only had nearly 70,000 downloads, and it quietly went offline in July 2020. Since 2018, the short video business has been added to Instagram and Facebook.
It is worth mentioning that in April this year, Meta also launched a new full-screen video player, aiming to bring users a more consistent design and experience, whether it is short video Reels, long video or live content.
It is reported that the new player displays videos in vertical mode by default and is able to recommend the next video to watch according to user preferences. This change could have a significant impact on key metrics that creators and advertisers focus on, such as watch time, views, reach, and more. The new player will first be rolled out on iOS and Android devices in the United States and Canada, and will be gradually rolled out globally.
It cannot be ignored that this update of the video player coincides with a possible ban on TikTok in the United States. If TikTok withdraws from the United States, Meta will be the biggest beneficiary.