In this Meta earnings call summary, we summarize key metrics and topics discussed on the Q4 2022 call, including:
- Earnings Call Summary
- Revenue Highlights
- Profitability
- New Initiatives
- Mergers & Acquisitions (M&A)
- Key Partnerships
- Upcoming Product Launches
- Guidance
This earning call summary was partially done by our GPT-3 enabled earnings call assistant, which you can learn more about here.
Earnings Call Summary
Meta Platforms held their fourth quarter and full year 2022 earnings conference call on February 1st, 2023. The call was led by Mark Zuckerberg, CEO, Susan Li, CFO, and Javier Olivan, COO.
During the call, Deborah Crawford, Vice President of Investor Relations, reminded the audience that the remarks included forward-looking statements and that actual results may differ materially from those contemplated.
The call then proceeded with Mark Zuckerberg discussing the company's focus on delivering compounding earnings growth while investing in future technology.
Susan Li then discussed the revenue outlook for the first quarter of 2023, which is expected to be in the range of $26 billion to $28.5 billion, with a 2% headwind from foreign currency.
She also discussed the expense outlook for the full year 2023, which includes investments in AI and a focus on efficiency. Javier Olivan discussed the health of the broader digital ad space, and the company's focus on ROI for AI investments.
The call concluded with Susan Li discussing the headwinds from IDFA and ATT, as well as the Digital Markets Act in the EU. Overall, the call focused on the company's focus on delivering compounding earnings growth while investing in future technology, as well as the revenue and expense outlook for the first quarter and full year 2023.
Revenue Highlights
This quarter, total revenue was $32.2 billion, down 4% year-over-year on a constant currency basis. Had foreign exchange rates remained constant with Q4 of last year, total revenue would have been approximately $2 billion higher.
- The largest positive contributors to year-over-year growth in Q4 were the travel and healthcare verticals, though both are relatively smaller verticals in absolute share.
- Foreign currency remained a significant headwind to advertising revenue growth in all international regions.
Their guidance range of $26 billion to $28.5 billion corresponds to negative 7% to plus 2% year-over-year growth.
Profitability
This quarter, the company reported an operating income of $6.4 billion, representing a 20% operating margin. Net income was $4.7 billion or $1.76 per share.
Capital expenditures, including principal payments on finance leases, were $9.2 billion, driven by investments in servers, data centers and network infrastructure. Free cash flow was $5.3 billion and the company reported a tax rate of 24%.
The company also took significant actions in 2022 to operate more efficiently, such as layoffs, deprioritizing certain projects and curtailing non-headcount-related expenses. These actions have put the company in a better position in terms of financial performance for this year.
Industry Trends
This quarter, the online commerce and CPG verticals saw negative year-over-year growth, while the travel and healthcare verticals saw positive growth.
Ad revenue growth was strongest in the Rest of World region at 5%, while North America was flat. Foreign currency remained a significant headwind to advertising revenue growth in all international regions.
Facebook and Instagram are shifting from being organized solely around people to being organized around interests and topics, and they are investing heavily in AI technologies.
Finally, the company is focused on efficiency and reducing management layers to position itself to be an even more productive organization going forward.
New Initiatives
In Q4, Facebook and Instagram shifted from being organized solely around people to being organized around relevant and engaging ads.
Facebook also tested shop ads in the U.S. and saw increased performance. Additionally, Facebook took significant actions to operate more efficiently, including layoffs, deprioritizing certain projects, curtailing non-headcount-related expenses, and consolidating office facilities.
Lastly, Facebook shipped Quest Pro at the end of the quarter, which is the first consumer product to be powered by AI.
Mergers & Acquistions (M&A)
This quarter, there were no merger & acquisitions (M&A) announced by Facebook. However, the company did take significant actions to operate more efficiently, including layoffs and deprioritizing certain projects.
Additionally, the company streamlined its future data centers to a new architecture, which is expected to be more cost efficient and more flexible. Finally, the company also announced a $40 billion increase in its stock repurchase authorization.
Key Partnerships
This quarter, Facebook announced a number of key partnerships that are expected to drive growth in the future.
These include a partnership with Shopify to launch shop ads, a partnership with Microsoft to build a new data center architecture, and a partnership with Bank of America to streamline the company. These partnerships are expected to help Facebook drive user engagement, monetization, and cost savings.
Meta is also is investing heavily in AI technology, which is expected to drive further growth in the future.
Upcoming Product Launches
During the call, Mark Zuckerberg discussed the two major technological waves driving Facebook's roadmap: AI and the metaverse. He mentioned that Facebook and Instagram are shifting from being organized solely around people to being organized around interests and topics.
"Generative AI is an extremely exciting new area with so many different applications. And one of my goals for Meta is to build on our research to become a leader in generative AI in addition to our leading work in recommendation AI...
He also discussed the AI discovery engine, which is being used to produce more relevant content for users. Additionally, he mentioned the Reality Labs team, which is working on new products and services, and the shop ads feature, which is being tested in the U.S. and is showing increased performance.
We have a bunch of different work streams across almost every single one of our products to use the new technologies, especially the large language models and diffusion models for generating images and videos and avatars and 3D assets and all kinds of different stuff across all of our apps." - Mark Zuckerberg
Finally, he mentioned that there will be more details shared over the coming months about the use cases of AI and the larger user base.
Guidance
On the call, Susan Li, CFO, discussed guidance for Q1 2023. The guidance range of $26 billion to $28.5 billion corresponds to negative 7% to plus 2% year-over-year growth and reflects a wide range of uncertainty given the continuation of the general macro environment.
The guidance also assumes foreign currency will be an approximately 2% headwind to year-over-year total revenue growth in the first quarter based on current exchange rates.
Additionally, the guidance includes an estimated $1 billion in facilities' consolidation charges, which is down from the prior $2 billion estimate. Finally, the guidance also includes lower expense and CapEx outlooks due to the company's focus on efficiency.
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