Today's Piece is Powered by Quartr:
1. Meta Demand
Meta Guided to $29.0 billion in quarterly revenue and posted $28.8 billion, missing expectations by 0.7%.
Analysts Expected (per Bloomberg Terminal):
- $28.9 billion in revenue. Meta missed by 0.4%.
- $28.5 billion in ad revenue. Meta missed by 1.0%.
- Ad impression growth of 9.6%. Meta posted 15% growth, sharply beating expectations.
- Ad price growth of (9.7%). Meta posted (14%) growth sharply missing expectations.
“It was good to see a positive trajectory on our engagement trends this quarter from Reels and our investments in AI.” — Founder/CEO Mark Zuckerberg
Facebook’s user growth missed analyst expectations by under 1% in 3 of 4 categories. Interestingly, for Facebook DAUs, it posted a slight beat. Note that global user growth was impacted by ending its Russian operations.
More context on demand:
- Revenue grew 3% YoY constant currency. Dollar strength shaved 400 basis points off of its growth.
- This quarter marked Meta’s toughest YoY pandemic growth comp.
- Headwinds ranging from IDFA to lapping stimulus/social distancing, to a content monetization shift to Reels to broader macro all continued to weigh on growth this quarter.
- Ad revenue growth was strongest in APAC and weakest in Europe. The same can be said for ARPU.
2. Profitability
Analysts were looking for $2.55 in earnings per share (EPS). Meta earned $2.46, missing expectations by 3.6%.
More Margin Context:
- FCF margin is where Meta’s heavy CapEx impacts margins most noticeably.
- Analysts were only expecting $3.55 billion in FCF while Meta’s $4.45 billion beat expectations by 25.4%. It’s controlling costs.
- Meta's tax rate was 18% vs. 17% YoY -- a slight help to net income.
- Quest 2 price increases allowed Meta to shrink its loss reserves which slightly aided margins this quarter.
There's a very good reason as to why I'm an active Quartr user.
Must cost a fortune, right? Wrong. It’s a free-to-use force multiplier for research efficiency. Simply go to your app store of choice and try it today. There’s no other free tool like Quartr out there -- and I’m confident that you’ll all agree. Check it out here.
3. Guidance
For Q3 2022, analysts wanted $30.4 billion in revenue. Meta guided to $27.25 billion missing expectations by 10.4%. Worst part of the report, but also understandable.
Meta also told us that Reality Labs revenue will be lower next quarter vs. this quarter.