Meta Q1 - Twin Surprise

Meta Platforms released a decent set of earnings on Wednesday night, showing that its main service, Facebook, added more users than projected. Capital spending was also reined in. The shares surged as much as 19% on these twin surprises. The market clearly approves of these developments, which indicate that the group is dealing with growing competition, maintaining margins and satisfying its advertisers, despite technology and privacy challenges.

Revenue grew 7% year-on-year to $27.9 billion for the quarter, despite the war in Ukraine. Facebook added 31 million new daily active users to bring the total daily user base to 1.96 billion. Instagram is still firing on all cylinders. TikTok remains a big threat but the Zuck and his colleagues are working tirelessly to keep young users actively engaged.

According to data from Cowen research, about 51% of TikTok's monthly active users are also on Instagram reels, Instagram's product to replicate TikTok. Reels already make up more than 20% of the time that people spend on Instagram. Also, 31% of Americans rely on Facebook as a regular news source, compared to just 6% for TikTok, based on work by the Pew Research Centre.

Meta's Reality Labs which develops VR headsets, AR glasses and the metaverse reported revenue of $695 million, but the unit is still losing almost $3 billion as the company ramps up its investment in this area. Zuckerberg said that level of cash burn would ease as the years go by.

Meta now enjoys the attention of over 3.64 billion humans. Some critics feel that this number has peaked, but we see it as an opportunity for further monetisation. Keep in mind that apps like WhatsApp and Messenger are ad-free.

Hold on to your Meta shares; we are confident that you will be rewarded for being patient during this period of volatility.