Meta celebrates an extraordinary quarter, closing 2023 with record revenues of $40.1 billion and an operating margin of 41%. The positive results were mainly driven by two key sectors: online advertising and virtual reality.
We thus discover that Reality Labs, the division dedicated to the metaverse, has invested $5.6 billion in research and development, but has already recovered $1.07 billion thanks to sales of the Quest 2 and the brand new Quest 3, launched last October. The latter, according to Mark Zuckerberg, “got off to a great start” and is shaping up to be the most popular mixed reality device on the market, launching a direct challenge to the Apple Vision Pro just launched on the market. Despite this, CFO Susan Li confirmed that Reality Labs’ operating losses will increase year over year due to investments in the AR/VR segment, and that will not change regardless of Quest 3 sales in 2024.
Ad revenue continues to be Meta’s core, with about $10.10 earned for each monthly active user on the group’s apps. In this regard, there are currently about 4 billion users in total. The company aims to further strengthen this sector by investing in new advertising formats such as Instagram Reels and Threads, which are proving to be hugely successful. We’re talking about something like 3.5 billion Reels shared every day, while on Threads, monthly active users have risen to 130 million.
Meta is actively looking to the future, and as can be easily guessed from the moves of recent months, it has decided to dedicate part of its record profits to expanding its artificial intelligence infrastructure. The goal is to develop open-source AI (AGI) that far exceeds the capabilities of Llama 2, the large language model presented at Connect 2023. The goal is to be able to emulate more and more the reasoning ability of human beings, but it will have to clash with giants such as GPT-4 and Google’s Gemini, the LLM that is also about to be introduced in our country.
Despite the exciting results, CFO Susan Li warned that possible obstacles could emerge in the future. The company will face increasing “legal and regulatory headwinds” in the European Union and the United States, particularly from the FTC, which could negatively impact the business. In summary, 2023 closes with a victory for Meta, which leaves behind the disappointing performance of 2022, however, the company will have to carefully navigate the choppy waters of the new year between fierce competition and possible regulatory interventions.
In closing, Meta recently announced a series of changes to Instagram and Facebook Messenger to improve the protection of minors, introducing some more restrictive default settings on messaging.