Photo Credit: Gerd Altmann from Pixabay

Earlier last week, Meta (Nasdaq: META), formerly Facebook, announced its first quarter results that outpaced market expectations. The company continues to invest in its Metaverse initiative, but the results announcement drove the stock up 12% in the after-hours trading session.

Meta’s Financials

Meta’s Q1 revenues grew 3% to $28.65 billion, ahead of the market’s estimates of $27.65 billion. Adjusted EPS fell 24% to $2.20, which was also significantly better than the market’s forecast of $2.03.

Daily Active Users (DAUs) grew 5% to 2.04 billion compared with the market’s expected 2.01 billion. Family monthly active people (MAP) were 3.71 billion, in line with the market’s expectations. Average revenue per user was reported at $9.62 compared with analyst estimates of $9.30.

For the second quarter, Meta expects revenues to be in the range of $29.5-$32 billion, compared with the analyst estimates of $29.5 billion.

Meta’s Growth Plans

Meta has announced significant restructuring plans to make itself more efficient. It has already announced two of the three waves of restructuring and will be announcing its third wave this month. It expects to reduce its employee count by 21,000 and incur restructuring costs of $3-$5 billion for the year.

While it continues to manage costs, it is also mindful of its investment plans. Its Reality Labs unit, which is responsible for the virtual reality and augmented reality technologies for the metaverse, generated $339 million in revenues in the latest quarter, and reported a significant operating loss of $3.99 billion. Meta does not expect this investment to slow down. In fact, it expects the losses to increase during the year in the segment as it continues to bet on the technology.

Within AI, Meta recently open-sourced many of its models to allow people to experiment and build with the technology. This quarter, it released LLaMA, its AI language model to researchers. Unlike ChatGPT and Bing, which are services that people can converse with, LLaMA is a research tool that will help experts improve the problems of AI language models. It is expected to help build solutions that can address concerns of bias and toxicity. The tool has 65 billion parameters but claims to outperform larger models.

Meta is also toying with ideas on how to leverage generative AI for its own growth. It plans to use generative AI for advertising growth. Analysts believe that Meta will release tools later this year that will allow companies to automate the creation of multiple versions of advertisements that will be customized with different text and images based on the audience. It will be able to automatically edit elements such as the language used, colors, and even which celebrities and influencers appear in promotions to increase the appeal to groups of people. 

Meta has also developed its image generation technology called Instance-Conditioned Generative Adversarial Networks (IC-GAN). According to researchers, unlike other such technologies, IC-GAN can be used to create images that are more diverse than the images contained within their training datasets. IC-GAN will be able to leverage generative AI to create a richer set of synthetic training data from a smaller set of real-world training data. This will help reduce the cost of generating, collecting, and storing data for training AI algorithms.

Meta realizes that its Metaverse and AI are long-term investments. It is planning its largest investment to be in advancing AI and building it into every one of its products. By creating tools like LLaMA and IC-GAN, Meta is looking at creating AI capabilities that help users of its apps express themselves, discover content, and increase internal efficiencies by helping write better code faster. 

Meta’s stock is currently trading at $234.93 with a market capitalization of $608 billion. It had touched a high of $244.92 post the results announcement and has climbed from the year low of $88.09 that it had fallen to in October last year.

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