Meta's Q4 2024: AI, Ads and Ambitions

Meta reports quarterly earnings on January 29, 2025. Here's what I'm expecting:

AI Investment: Meta’s enormous investment in AI infrastructure will weigh heavily on investors when the company reports quarterly earnings on January 29, 2025. The immediate popularity of the Chinese LLM DeepSeek shows that China's ability to deliver faster, better and cheaper technology is hugely appealing to consumers.

Meta’s AI Advantage: The fact that LLaMa is open-source sets Meta apart from other large language model providers like Open AI, which charge a fee for access. But the level of consumer interest and buzz about Meta AI is far outweighed by the popularity of ChatGPT. However, Mark Zuckerberg's goal of reaching 1 billion people with Meta AI in 2025 is vague enough that it will certainly be possible to achieve. By embedding AI into the everyday things that people do on Facebook, Instagram or WhatsApp, it will naturally make AI a bigger part of the social media experience.

Ad Revenue: Meta’s advertising business is still performing strongly, and it reached an historic milestone in Q4, topping $40 billion for the first time (Zacks’ consensus is $45.73 billion). The recent news that Meta will launch ads in Threads will give advertisers another surface to deploy. However, Threads won’t be a meaningful contributor to ad revenue in 2025.

Chart generated by ChatGPT

Reality Labs: Meta’s Reality labs investments will continue to weigh heavily on investors. Mark Zuckerberg will have to be very persuasive to convince the market that these huge expenses are going to pay off eventually. However, a report by The Information indicating that Reality Labs will be more closely aligned with other divisions may change the way these losses are reported.

What to Pay Attention to in the Earnings Call:

1)        Mark Zuckerberg's explanation of capital expenditures related to AI infrastructure

2)        Zuckerberg's reasoning behind the changes to Meta’s content moderation policies, and how they might impact usage and ad revenue

3)         How advertisers are deploying new AI tools such as video-ad editing

4)        Meta’s plans for monetizing AI (i.e., how soon it will incorporate ads into AI features on its platforms)

5)        What, if anything, Zuckerberg will say about the future of TikTok in the US. The question will surely come up, but I doubt he will address it.