Meta Platforms Q1 2023 – The phoenix

Meta continues to rise from the ashes of 2022.

• Meta Platforms roared back to life with an excellent set of earnings which give it a platform to resume investing and, as long as it does so soberly, there are better times ahead.
• Q1 2023 revenues / EPS were $28.6bn / $2.20 nicely ahead of forecasts of $27.6bn / $1.97 and the company guided well for the coming quarter.
• Engagement with Meta’s properties continues to expand steadily with DaUs up 4% YoY and advertising impressions up 26% YoY.
• Revenues in Q2 2023 are expected to be $29.5bn – $32.0bn which was also ahead of consensus which was forecasting $29.5bn.
• Meta now expects to incur $86bn – $90bn in expenses in FY 2023 which is down again from the previous range of $86bn – $92bn.
• Meta is reaping the benefits of its rapid action to become more efficient but to be honest, it was so inefficient and so bloated with cost, that this was not particularly difficult.
• It is also a demonstration that Meta is entirely controlled by Mr. Zuckerberg as it was not until he had enough of seeing his net worth pummeled by the market and being annoyed by gadflies like me that he decided that something needed to be done.
• Mr Zuckerberg spent most of the conference call discussing AI and thanks to the improvement in the financial performance, there is space for investment to resume in both AI and the Metaverse.
• Meta is doing a bit better in AI these days with several large language models (LLMs) that have been well received and also a healthy dose of papers published in the academic literature.
• Meta is going to continue investing here but mostly it called out the need to continue building infrastructure to support this echoing Google’s comment earlier this week.
• This is another sign that while LLMs offer some great use cases, they are expensive to support which has ramifications for smaller companies looking to make use of the technology.
• At the same time the Metaverse has not been forgotten and investments there continue but I hope that are being made in a more organized and structured fashion.
• Nothing has actually changed in the Metaverse as devices continue to sell (albeit more slowly now subsidies are less) and investments from Meta and others continue to be made.
• What has changed is the hype which has now all but vanished which actually makes life easier as there are no longer a series of ridiculous expectations that need to be met.
• The reality is that outside of the enterprise, the Metaverse remains many years away, but Meta is right to invest in it.
• In smartphones, it remains hostage to both Apple and Google and their depredations on its business have left Mr Zuckerberg determined that in the next generation, Meta will not repeat the experience.
• This is a big gamble as there is no guarantee that the Metaverse will amount to anything at all, but if it does then Meta remains in a leading position.
• Meta will now resume investing thanks to the improved financial performance, but I hope that the last 12 months have tempered Mr Zuckerberg’s enthusiasm.
• What is needed now are rational, planned investments which have a risk/reward profile as opposed to the random onboarding of bodies that went before.
• This is how the stock can keep on going up as with the huge recovery that we have seen, this is no longer a value play.