The 1Q2023 results for Meta Platforms are a mixed bag. On one hand, the increase in revenue, daily and monthly active users, and ad impressions indicate that Meta’s user base and advertising business are growing. The revenue growth is roughly in line with the overall market. Meta seems to have gotten over the worst of Apple deprecating IDFA, which made targeting, effectiveness, and consequently, ad sales worse. This growth is significant as it demonstrates the ongoing relevance and appeal of the company’s social media platforms, and its ability to generate income from them.
On the other hand, the increase in costs and expenses, the decrease in net income and diluted earnings per share, and the ongoing restructuring efforts reflect challenges the company is facing.
The company is, however, working on cutting costs. After the upcoming third wave of Meta layoffs in early May, Meta will have laid off a full quarter of its employees. (And more may be coming, even though Mr. Zuckerberg has made no such indications.) This will save money, but of course morale is at a low point within the company for now.
As far as augmented and virtual reality is concerned, it is probably fair at this point to say that the costly and ill-advised “Metaverse” adventure has come to an end. This may save billions of dollars, depending on how much of those resources will be applied toward artificial intelligence and large-language models (LLMs). (Facebook has announced it would release a GPT-like chatbot but has not done so yet.) The shift from AR/VR to AI and LLMs is a welcome one: The Metaverse never had a clear consumer use-case except for gaming. The technology is still underdeveloped, it is too cumbersome and expensive. The horrible AR/VR device sales numbers put the final nail into AR/VR’s coffin, at least for the foreseeable future. AI/LLM, on the other hand, are a major platform shift in our industry and present Meta with challenges, but also with great opportunities.
Meta is undergoing a correct strategic shift towards AI and LLMs and aims to become more efficient by reducing its workforce. These restructuring efforts and the resulting charges may impact the company’s short-term profitability, but they could also help Meta to realign its focus and resources for long-term success in the evolving technology landscape.
Overall, the Q1 2023 financial results signify a period of transition for Meta as it navigates between the growth of its core social media business and the challenges associated with restructuring and shifting its strategic priorities.
The market liked Meta’s 1Q: the stock was up almost 12% in after-hours trading.
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