Earnings Analysis: Meta Q3 2023
1. Revenue Growth Impresses
Our first takeaway from Meta’s Q3 earnings was revenue growth coming in at 23%. This was Meta’s largest year-over-year increase since 2021 and almost back to pre-covid growth levels.
2. Reality Labs Continues To Bleed
Meta has lost over $37 billion on its Reality Labs business just in the last three years. This gamble on AR will go down as one of the largest and most expensive bets a company has ever placed. It is still to be determined if it will go down as the worst bet of all time or an expensive bet for long-term value.
3. Headcount Has Likely Bottomed Out
After cutting 25% of their staff in the last year, Meta has started hiring again and expects headcount to grow over the next year. We will see how long this lesson stays with Meta as some are reporting that Meta is hiring faster than expected.
4. “The Year of Efficiency”
Mark Zuckerberg calling 2023 the year of efficiency was not an understatement. The two charts above show that Meta is clearly doing more with less people. We’ll leave the debate if Meta is actually more efficient or if they are just over-working the remaining employees to the employees.
5. How Is Meta Still Growing Users?
This question has been asked by just about everyone since 2018. Everyone forgets that the US only makes up less than 5% of the world population and that Meta includes users across Facebook, Instagram, WhatsApp, and Messenger in this user count metric.
6. Meta Can Still Monetize
A fair question is how can Meta continue to growth monetization per user. While they don’t break out monetization by product, we know Instagram Reels monetization has improved dramatically in the last few quarters and that Meta now makes over $200 per user per year in the US and Canada. Simply ridiculous.
7. Our Favorite Metric
Long-time readers will know free cash flow is what we care about. Meta is close to record levels of free cash flow and will likely break their quarterly record in Q4. We are still shocked that Meta had negative free cash flow for two quarters last year and almost equally shocked how fast they were able to get it back.
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