Meta Platforms Q1 2024 earnings: anticipated growth and AI innovations

When does Meta Platforms report earnings?

Meta Platforms (formerly Facebook) is set to release its quarter one (Q1) 2024 financial results on 25 April 2024, 6.05am AEST, after the US market closes.

Meta Platforms’ 1Q 2024 results – what to expect

Expectations are for Meta’s Q1 revenue to register a 26% year-on-year (YoY) growth to US$36.1 billion, up from US$28.6 billion a year ago. This will be the highest quarterly revenue growth since Q3 2021. Earnings per share are expected to grow almost twofold to US$4.29, versus US$2.20 a year ago.

Having undergone a series of cost-cutting measures in 2023, along with a rebound in the digital advertising (ad) space, the net profit margin is expected to stay around the 30% range at 31.1% for the reporting quarter, up from 19.9% a year ago but slightly lower than Q4 2023 (35.0%).

Meta's key matrics

Meta's revenue growth (YoY)

Meta's global ad revenue landscape

More than 96% of Meta’s revenue revolves around ad spend, with significant exposure to the US and Canada (40%), Asia Pacific (26%), and Europe (23%).

Forecasts from Interpublic Group (IPG)’s Magna unit suggest that ad spend will continue to accelerate in 2024, with the US ad market expected to grow 9% to reach US$369 billion. The recent run in stronger-than-expected US economic conditions seems to validate this view. Not to forget, this year is a US presidential election year, which will likely offer a boost in political ad spending.

2024's ad spend forecast for the US Presidential election

The 2020 US election was the most expensive campaign year in history, with an estimated US$9.6 billion in political ad spending. Estimates from eMarketer suggest that political ad spending in the upcoming 2024 election may be 30% higher than the previous election, with a potential 156% spike in digital ads. That may aid in underpinning growth momentum for key digital ad players, like Meta and Google, through 2024.

Signs of growth: rising user activity and ARPU boost for Meta

Further improvement in metrics expected The past year has seen a turnaround in active users and improvement to its average revenue per user (ARPU). In Q4, the total number of ad impressions served across Meta’s services jumped 21%, and the average price per ad increased by 2%, which served as validation for its strategy in improving on-platform ad experiences while investing in models to accurately predict and serve relevant ads to consumers and improved performance for advertisers.

The management earlier guided that it saw a trend of ‘strong, broad-based advertising demand across verticals, particularly within online commerce and gaming’, which set the tone for the recovery momentum to continue. Having an additional day in the reporting quarter (29 February) may offer some slight benefit as well.

Meta Platforms' financial health: a deep dive into ARPU, MAU, and DAU

Unveiling the Next-Gen MTIA: a leap in AI processing

In an effort to reduce costs and reliance on external suppliers, US big-tech firms have recently pivoted towards developing their own in-house chips. Meta is at the forefront of this shift, achieving considerable success in its chip development initiatives.

Meta recently introduced its next-generation Meta Training and Inference Accelerator (MTIA) in-house artificial intelligence (AI) chip, poised to succeed last year's MTIA v1. The next-gen MTIA, constructed on a 5nm process node (compared to the prior 7nm), features increased internal memory and operates at a higher average clock speed than its predecessor.

Llama 3: the latest generative AI assistants

Market participants are eager for further details on how these new chips will enhance Meta's new generative AI products and services, including their ability to improve the efficacy of its advertisements, such as ranking and recommendation algorithm models.

Meta has also disclosed plans to launch Llama 3 next month, marking the latest iteration of its large language model designed to power generative AI assistants. This release aims to compete with OpenAI’s ChatGPT and surpass its own earlier versions, Llama 1 and Llama 2, which faced criticism for their limitations.

Despite previous indications from management that GenAI products may not significantly drive revenue in 2024, there is anticipation for their longer-term influence. Enhanced ad engagement is also expected to bolster user growth and enable Meta to elevate ad pricing, significantly contributing to the company's development.

First-ever quarterly dividend announced, strong cash flow Assurance

Market watchers can anticipate forthcoming returns for Meta shareholders, highlighted by the company's announcement of its inaugural dividend (US$0.50) in February 2024, slated for quarterly distribution. The US$0.50 dividend is anticipated to persist in forthcoming results, with an estimated annual dividend of US$2.00.

Although this represents a modest dividend yield of 0.4%, it underscores the company's robust cash flow. Additionally, last quarter saw the approval of an enlarged US$50 billion share repurchase program.

Meta technical analysis

Year-to-date, Meta has been one of the top-performing ‘Magnificent Seven’ stocks, with a 41% return (as of 16 April 2024), trailing just behind Nvidia’s 74%. Following a gap-up from its previous earnings release, Meta’s share price continues to trade on a series of higher highs and lower lows within an ascending wedge pattern.

Given the wider market retracement, its daily Relative Strength Index (RSI) is back to retest its key level of 50, which has not been breached since December last year. Any failure for the mid-line to hold may indicate sellers in greater control, at least for the moment.

In the event of further de-risking, a support confluence at the US$480–US$490 range will be on watch, where the lower wedge trendline coincides with the upper edge of its daily Ichimoku Cloud support and its 50-day Moving Average (MA). A dip below the US$480 level could put the US$450 level next in line for scrutiny.

Meta daily chart