“We had a good quarter,” is CEO Mark Zuckerberg’s summation. “We continue to see strong engagement across our apps, and we have the most exciting roadmap I’ve seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall.”
Meta’s revenue for Q2 amounted to almost $32.0 billion, up 11 percent year-on-year (from $28.8 billion). Net income was up 21 percent to $7.8 billion. The operating margin was flat at 29 percent.
Costs and expenses were up in similar proportion (+10%) and included Q2 restructuring costs of $780 million (for layoffs, among other things) and legal expenses of $1.87 billion. Among the company’s disputes were two class-action lawsuits, one over the “potential reach” of Meta’s ads for small companies, the other over Facebook’s alleged sharing of private user data with third parties (e.g., Cambridge Analytica). The first was “administratively closed until further order” in February, but for the second, Meta is paying out a settlement of $725 million. (Users have until Aug. 25 to claim a share of this sum.)
Facebook’s daily and monthly active users were up 5 and 3 percent, respectively, to 2.06 and 3.03 billion. Ad impressions on all Meta apps rose 34 percent year-on-year, while the price per ad decreased by 16 percent.
Advertising continues to account for the near entirety of Meta’s revenues: $31.5 of a total of $32.0 billion for Q2 ($59.6 of 60.6 billion for H1).
The dark spot in all this was Reality Labs, the division specialized in virtual and augmented reality (VR/AR) and the metaverse that gave the company its new name. Here Q2 revenues were down by about 40 percent, from $452 to $276 million, and first-half revenues by about 46 percent ($1,15bn to $616m).
The Labs’ generated loss from operations for Q2 increased year-on-year by 33 percent (from -$2.8bn to -$3.7bn). This is more than twice the proportional year-on-year increase in loss for last year’s second quarter (-15.4%). The loss for H1 2023 increased 34 percent (-$5.8bn to -$7.7bn).
According to the CFO commentary, Meta is expecting Reality Labs’ operating losses in 2023 “to increase meaningfully year-over-year” because of “product development” in AR/VR and “investments to further scale our ecosystem.”
Meta is otherwise projecting total Q3 revenue of $32 to $34.5 billion. Full-year capital expenditures should amount to $27-$30 billion, full-year expenses to $88-$91 billion. The company is making no further projections for now.
It is, however, considering a facilities consolidation and a restructuring of its data centers. This, along with severance pay and payroll increases – through a shift in workforce to “higher-cost technical roles” – should cost about $4 billion over the course of 2023.
