Meta Posts Q4 Earnings Beat, But Reality Labs Losses Mount

Meta Platforms Inc., parent of Facebook, Instagram, and WhatsApp, released its fourth-quarter 2024 earnings, once again revealing substantial losses in its Reality Labs division, responsible for developing virtual and augmented reality technologies and the metaverse. Despite this, the company's overall results exceeded analysts' expectations, which theoretically reassured investors, but shares were down as much as 4% before the start of the press conference. Currently, the shares are in a small plus of about 1%.

Breakdown of Company Results

• Total Revenue: $48.39 billion (up 21% year-over-year), exceeding analysts' expectations of $46.98 billion.
• Advertising Revenue: $46.78 billion (up 21% year-over-year), exceeding expectations of $45.65 billion.
• Family of Apps Revenue: $47.30 billion (up 21% year-over-year), exceeding expectations of $46.08 billion.
• Reality Labs Revenue: $1.08 billion (up 1.1% year-over-year), below expectations of $1.11 billion.
• Other Revenue: $519 million (up 55% year-over-year), exceeding expectations of $433.3 million.
• Operating Income: $23.37 billion, exceeding expectations of $20.09 billion.
• Reality Labs Operating Loss: $4.97 billion (up 6.9% year-over-year), below expectations of a $5.1 billion loss.
• Operating Margin: 48% (up from 41% year-over-year), exceeding expectations of 42.6%.
• EPS (Earnings per Share): $8.02 (up from $5.33 year-over-year), exceeding expectations of $6.78.
• Average Daily Active Users (DAU) in Family of Apps: 3.35 billion (up 5% year-over-year), exceeding expectations of 3.28 billion.
• Ad Impressions: Up 6% year-over-year in Q4 and up 11% for full year 2024.
• Average Price per Ad: Up 14% year-over-year in Q4 and up 10% for full year 2024.

Reality Labs: Meta Still Losing Billions on AR/VR Push

The Reality Labs division posted an operating loss of $4.97 billion on revenue of $1.1 billion. While the loss is massive, it came in slightly below analysts' forecasts, who had predicted a loss of $5.4 billion. Since 2020, Reality Labs has generated over $60 billion in operating losses, raising questions about the future of the metaverse and Mark Zuckerberg's strategy.

Good News From the Family of Apps

Fortunately for Meta, its Family of Apps (Facebook, Instagram, WhatsApp) is doing much better. Revenue from this segment increased by 21% year-over-year, reaching $47.3 billion, which also exceeded expectations. Operating profit increased by 35%, reaching $28.33 billion. Daily active users increased by 5%, to 3.35 billion. Ad revenue also increased by 21%, to $46.78 billion.

What to Watch For

• AI Investments: Meta announced that it plans to spend $60 billion to $65 billion on capital expenditures in 2025, mainly on computing infrastructure related to artificial intelligence. Zuckerberg emphasizes that AI is crucial to the development of the metaverse, including for the Ray-Ban Meta smart glasses.
• Future of the Metaverse: The huge losses in Reality Labs cast doubt on the future of the metaverse. Investors are increasingly skeptical of Zuckerberg's vision and fear that billions of dollars are being spent on a project that may never yield the desired results.
• Competition: Meta faces increasing competition in the VR/AR market. Apple recently introduced its Vision Pro headset, and Google and Samsung are working on their own devices.
• Regulations: Meta points to the "active regulatory landscape," including legal and regulatory actions in the EU and the US, which could significantly impact its operations and financial results.

Meta is a company that balances on two fronts. On the one hand, it generates huge revenues and profits from its main social media platforms, being one of the biggest companies benefiting from advertising. On the other hand, it suffers huge losses in an ambitious but risky metaverse project, while also focusing on the development of artificial intelligence. Meta's future depends on whether Zuckerberg can convince investors that his vision of the metaverse makes sense, and also on how the company will cope with increasing competition and regulations. For now, despite billions in losses in Reality Labs, Meta is doing well, and Zuckerberg's recent rapprochement with a prominent political figure may suggest a strategic business move to ensure favorable operation in the new political climate. Zuckerberg announced changes in moderation policies, which are intended to lead to a reduction in censorship, which the figure repeatedly spoke about during his election campaign.

Investors currently believe in Zuckerberg's vision, and the company's shares have recently gained stronger than the Nasdaq. Potentially, new historical peaks await us tomorrow. Source: xStation5