Meta 22Q1 Investment Notes

All you need to know about this earnings season

Attitude: Meta Platform made progress this quarter across priorities and the community continues to grow, more people using Meta Platform services today than ever before. The Management is proud of how products of Meta Platform are serving people across the world during what has been a difficult period for people. The transition to the short-form video, which doesn’t monetize currently but Meta Platform is quite optimistic about its long-term value.

Guidance: Meta Platform expects Q2 2022 revenue to be in the range of $28 billion to $30 billion. This outlook reflects a continuation of the trends impacting revenue growth in Q1, including softness in the back half of the Q1 that coincided with the war in Ukraine. FB assumes foreign currency will be approximately a 3% headwind to YoY growth in the Q2. Over the next several years, Meta Platform’s goal, from a financial perspective, is to generate sufficient operating income growth from family of apps to fund the growth of investment in reality labs. For the expense outlook, FB expects 2022 total expenses to be in the range of $87 billion to $92 billion, driven primarily by the family apps segment, followed by reality labs.

VR/AR: Meta Platform’s focus for Horizon is building up the metaverse economy and helping creators make a living working in the metaverse. On the hardware side Meta Quest 2 continues to be the leading VR headset, later this year FB will release a higher-end headset with code-named Project Cambria, which will be more focused on work use and eventually replacing the laptop. This premium device will have improved ergonomics and full color pass through mixed reality to seamlessly blend the VR with the physical world. FB is also building in eye-tracking and face tracking so that avatar can make eye contact and facial expressions.

Obstacle: The signal loss resulting from Apple’s iOS changes, which is a meaningful headwind, but FB expects that with the right technology investments, it navigates okay over time. Other challenges are broader macro trends, like the softness in e-commerce after the acceleration during the pandemic. The war in Ukraine, has also had an impact on FB business. FB has been blocked in Russia and decided to stop accepting ads from Russian advertisers globally.

Mark Zuckerberg: I think that the cycle here between investment and meaningful revenue growth to be near or very profitable is going to be long. And I think it’s going to be longer for reality labs than for a lot of the traditional software that we’ve built. As you think about — just a bit of context that may be useful and why we’ve ramped expenses so much is, especially with the success that we’ve seen with Quest 2. We are now basically funding product teams to be building our future products two or three versions into the future, because when you’re designing hardware, these are multi-year plans that you’re building and kind of figuring out all the pieces.

Dave Wehner: On the retention and recruiting front, I’d say we continue to have success in recruiting as demonstrated by the 5,800 net new hires this quarter. So we’re pleased with our ability to do that. Also on the retention front attrition, which has stepped up since what we experienced during the pandemic is really still broadly consistent with levels that we have seen pre-pandemic. So it’s definitely something that we’re tracking and obviously the stock price is something that we watch, but the trends are relatively in line with expectations. So from that sense, we feel like we’re doing okay.

Dave Wehner: Because of the loss of users in Russia we do expect there to be a sequential decline in MAUs in Europe. We think that will feed over into overall global because I think that will tip it to be flat to down. Just as a reminder, some Russian users were still on our service as active users during our Q1 calculation.

It's clear that short-form video is a massive opportunity for the industry broadly, and we're very pleased about the offering that we have with Reels and the opportunity for us to compete for share and time in the market. Obviously, other competitors have strong offerings like TikTok, but we're pleased with what we've got with Reels.

Mark Zuckerberg: On the Reels monetization side, I think the main question here is there is the cycle. It’s like when we start doing Stories they had ads that were designed for news feed and just took some time for them to create effective content for Stories and I think we’re going to see the same thing for Reels. And the way we think about the pacing of this is that we do show ads with Reels, but we’re going to show more as the content gets better and as that ramps up to not be a big kind of pain point in the user experience.

Last but not least,