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Meta Platforms $META Q4 and FY2022 Results – My Key Takeaways

Calvin Lo

Meta Platforms (META), formerly Facebook, released Q4 and FY2022 results on 1st Feb 2023. Results were much better than expected, and META shares soared ~20%. Besides the revenue beat, seems like investors liked the user growth, $40B buyback announced, restructuring, and focus on efficiency in 2023.

Read: Meta shares soar almost 20% on fourth-quarter revenue beat | CNBC

Results highlights

  • Q4 2022
    • Revenue $32.2B, -4% yoy (+2% constant currency)
    • EPS $1.76, -52% yoy
  • FY2022
    • Revenue $116.6B, -1% yoy (+4% constant currency)
    • EPS $8.59, -38% yoy
  • Facebook daily active users (DAU) exceeded 2B on average, up 4% yoy
  • Share buyback ~$28B in 2022, announced $40B increase in share buyback authorization
  • Free cash flow $5.3B
  • Cash, cash equivalent, marketable securities ~$41B
  • Headcount 86,482, +20% yoy but excludes 11,000 laid off to be reflected by end Q1 2023

Key takeaways

  1. Year of efficiency (restructuring) – facilities consolidation, layoffs, data centre assets
  2. AI discovery engine and Reels for today
  3. Metaverse for the future

Year of efficiency (restructuring)

Meta incurred restructuring charge of ~$4.2B in Q4 due to facilities consolidation, layoff of ~11k employees, and pivot towards next generation data centre design including cancellation of multiple data center projects.

As a result of these cost cutting measures, Meta has lowered its outlook on expenses and capital expenditure. What’s noteworthy is they mentioned that substantially all capex continue to support the Family of Apps. No mention of Reality Labs (AR/VR/metaverse division).

Besides these, CEO Mark Zuckerberg also mentioned on the conference call other steps they are taking including working with the infrastructure team to deliver on their roadmap while spending less on capex, flattening their org structure by removing some layers of middle management to make decisions faster, deploying AI tools to help engineers be more productive, and be more proactive about cutting projects that aren’t performing or may no longer be as crucial.

AI discovery engine and Reels for today

Meta maintains that the 2 major technological waves driving their roadmap will be AI today and metaverse over the longer term.

Facebook and Instagram are shifting to discovery, i.e. showing you new content recommended by their AI system. Meta is also using AI to increase conversion of ads by over 20%, a necessity after Apple’s privacy changes pretty much handicapping Meta from being to target ads effectively.

Meta is also focused on improving monetisation efficiency of Reels, which are short-form videos and Meta’s answer to TikTok. Reels currently seem to be loss-making to gain market share, but as it scales, Meta intends to get to neutral by end 2023 or early 2024. Reels are also cannibalising from Feed, so they need to improve monetisation fast otherwise they’ll be losing more money the bigger Reels gets.

Metaverse for the future

Although AR/VR and metaverse talk has reduced significantly this quarter, CEO Mark Zuckerberg has not given up on it altogether. Meta is still working towards the next computing platform after the smartphone and they think that AR/VR hardware will be it.

At this point, that’s a big bet and the market knew it before. That’s probably why META stock has been sold off aggressively over the past year. META is still down >50% from its peak of ~$380.

With Zuckerberg taking a step back from metaverse talk though, I think that’s positive for META. Not saying metaverse won’t happen, but it’s still early days and a lot will ride on how well Meta can grow their Meta Reality ecosystem in the next couple of years.

Final thoughts

Before these results, my finger was really close to pushing the sell button on META stock. Thankfully, Zuckerberg is not so crazy after all and is willing to take his foot off the metaverse pedal for now (at least in public).

I’m comforted by the fact that Meta will still be focusing on its core offerings Family of Apps, and has a plan to leverage AI to overcome Apple privacy changes. Reels is also doing well to fend off TikTok, and hopefully it can continue to do so without sacrificing margins too much.

Even after the surge, META is trading at an undemanding 20x P/E at ~$186 (as at 7 Feb 2023). I’m taking this one out of the sell bucket and will hold onto my shares for now.

Disclosure: I’m long META

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