• 4Q23 revenue was a slight beat on better-than-expected ad revenue. PATMI was a huge beat on higher operating leverage and stronger topline growth. FY23 revenue/PATMI were at 102%/109% of our FY23e forecasts. PATMI grew 3x YoY as expenses declined 8% YoY despite the revenue jump. Its 35% net margin was close to pandemic highs of ~40%.
• Reels finally contributing net revenue to META, driving >25% YoY growth in daily watch time across all video platforms, and were re-shared 3.5bn times daily.
• META is intensifying its capital investments, with plans on having compute worth about ~600K H100 GPUs by end-FY24e to support long-term AI development.
• We raise our FY24e revenue/PATMI by 3%/9% on stronger ad revenue and a leaner cost structure. We expect META to benefit from the recovery in digital advertising, and also to lean on AI for product improvement and efficiencies which we expect will turn into greater value for advertisers. Due to recent price movements, we downgrade to an ACCUMULATE rating from BUY, with a raised DCF target price of US$520 (prev. US$375) as we roll over an additional year of valuations. Our WACC/g assumptions remain unchanged at 7.1%/4.5%, respectively.

The Positives

+ Beat on both top and bottom line showing year of efficiency has played out well. Revenue of US$40.1bn beat our estimates by 7%, driven by a 3% FX tailwind, a 21% YoY growth in ad impressions, and a 2% YoY increase in average price per ad (CPM). CPMs grew for the first time in 2 years, driven largely by APAC+China demand. 4Q24 PATMI increased 3x YoY to US$14.0bn, as META benefitted from strong revenue growth and a much leaner workforce – headcount/total expenses were both down 22%/8% YoY, respectively.

+ Well-positioned to build the most advanced AI products with a stockpile of GPUs. META remains focused on building out its tech infrastructure, stating that it intends to have the equivalent of ~600K H100 GPUs (350K H100s + remaining 250K of other GPUs) worth of computing power by the end of FY24e. This is enough compute to support Reels, and another Reels-sized AI service. In addition, its open-source software infrastructure should help attract top AI talent to develop Llama models and other AI products.

+ Reels commentary positive, contributing net revenue to META. In 4Q23, Reels drove >25% YoY growth in daily watch time across all video types, with Reels re-shared 3.5bn times a day. Historically, Reels growth has been a headwind to overall revenue growth due to its lower monetisation levels. However, it is starting to contribute net revenue to META, with the company further expecting Reels to leverage a unified recommendation system across all META patforms to drive further views and engagement.

The Negative

- Raised top end of FY24e CAPEX guidance. META raised the top end of its CAPEX guidance for FY24e by US$2bn, to US$30bn-US$37bn, indicating it expects the need for higher levels of server capacity to support more intense AI product development. We raise our FY24e CAPEX by 3% as a result.

• 3Q23 results were within expectations. 9M23 revenue/PATMI were at 72%/73% of our FY23e forecasts. Earnings grew ~2.5x YoY as expenses declined despite the jump in revenue.
• Advertising trends continued to accelerate (24% YoY), with Reels monetisation no longer a headwind on ranking improvements and higher ad supply.
• Wide 4Q23e revenue guidance (13%-24% YoY) implying concerns over volatility in the Middle East. FY24e total expense growth reaccelerating to 10% YoY.
• We nudge our FY23e revenue estimates higher by 2% on better advertising revenue, and widen EBITDA/net margins by 1% on lower total expenses. We expect META to benefit from the recovery in digital advertising, and sustain 30+% margins given its lower cost-structure. We upgrade to a BUY rating from ACCUMULATE, with a raised DCF target price of US$375.00 (prev. US$360.00).

The Positives

+ Advertising trends continued to accelerate. META saw a huge acceleration in digital advertising revenue (3Q23: 24% YoY vs 2Q23: 12% YoY). Much of this acceleration was contributed by e-commerce companies, particularly from outbound Chinese advertisers trying to reach other markets like the US and Brazil. We expect these trends to continue improving given a typically strong 4Q holiday season, and a general recovery in the digital advertising industry.

+ Reels monetisation no longer a headwind. Reels – which has been a near-term headwind given its lower levels of monetisation, reached an inflection point. Monetisation levels for Reels finally reached net neutral to overall revenue as a result of ranking improvements and increasing ad supply. We think that this is significant given the incremental time spent on short-form video formats like Reels vs Feed/Stories. Moving forward, we expect Reels to be a modest tailwind to revenue growth as it continues to improve its monetisation levels.

+ Earnings grew ~2.5x YoY; highest margins in >2 years. PATMI increased 164% YoY, with net margins of 34%, its highest since 2Q21. Earnings also beat consensus estimates by 21% on higher revenue growth, and a leaner cost structure after significant cost-cutting measures over the last 12 months. Headcount was down -24% YoY.

The Negative

- Uncertain growth outlook for 4Q23e, increasing expenses into FY24e. META issued a fairly wide revenue guidance for 4Q23e, with a range of US$36.5bn-40bn (implying a 13%-24% YoY growth) due to concerns over increasing volatility led by geopolitical events in the middle east. It also guided to a reacceleration in total expenses growth for FY24e (10% YoY), citing increasing AI-related investments and payroll expenses.

ddle 

• 2Q23 results were in line with expectations. 1H23 revenue/PATMI at 47%/43% of our FY23e forecasts.
• Double-digit growth in advertising after 5 quarters, outbound China spending and increasing Reels monetisation the main drivers. Guided 3Q23e revenue growth of 20% YoY.
• ~US$40bn in accumulated losses from Reality Labs and no timeline to profitability. A 12% drag on operating margin.
• We increase our FY23e revenue/PATMI estimates by 3%/2% to reflect a slightly faster recovery in advertising, and improvements in Reels monetisation. Additionally, FY23e CAPEX is cut by 10% due to delays in projects and equipment deliveries. Our WACC assumption of 7.1% remains unchanged, and our terminal growth rate assumption is increased to 4.5% (from 3.5%) due to higher ad monetisation rates. We upgrade to ACCUMULATE, with a raised DCF target price of US$360.00 (prev. US$235.00).

The Positives

+ Double-digit ad growth for first time in 5 quarters. Advertising revenue grew 12% YoY in 2Q23, led predominantly by growth in outbound e-commerce spending from Chinese advertisers. Engagement on META’s family of platforms also saw healthy trends as ad impressions grew 34% YoY, with AI-recommendations also increasing user time spent on its platforms by 7%. On the products side, Reels monetisation saw improvements, with an annual revenue run-rate of US$10bn vs US$3bn a year ago. Reels saw >200bn daily plays, with >75% of advertisers using Reels Ads.

+ Positive forward guidance, continuation of advertising trends. 3Q23e revenue guidance implies a 20% YoY growth at the midpoint, a significant expected acceleration in revenue due to several factors: 1) improving advertiser demand; 2) Reels continuing to increase monetisation due to higher ad load and incremental time spent; 3) 3% FX tailwinds vs 1% headwind in 3Q22; and 4) weaker 3Q22 comps (-5% YoY). 4Q23e is expected to be similar to 3Q23e with advertising demand recovering, albeit with a larger FX tailwind.

The Negative

- Committed to metaverse vision, no timeline for Reality Labs profitability. Losses continue to mount for Reality Labs segment, with expenses related to the launching Quest 3 next year a big drag. Operating loss for 2Q23 stood at -US$3.7bn, with accumulated losses of around -US$40bn so far. Reality Labs is currently a 12% drag on operating margins, and we think it will continue to be a drag for the foreseeable future.

• 1Q23 revenue and earnings modestly beat expectations on higher Ad sales. 1Q23 revenue/PATMI at 23%/20% of our FY23e forecasts.
• Investments in AI driving improvements in ad tech, with Reels user engagement and monetization starting to ramp up.
• Optimistic outlook with 2Q23e revenue guidance of 7% YoY growth at the midpoint (11% YoY top-end), while reducing FY23e total expense growth by 5%. Expectations for a final wave of headcount cuts in May 23.
• We increase our FY23e revenue estimates by 3%, and our FY23e PATMI/EBITDA estimates by 11% to reflect better-than-expected improvements in cost savings. We maintain NEUTRAL due to recent stock price performance, with a raised DCF target price of US$235.00 (prev. US$200.00), a WACC of 7.1%, and a terminal growth rate of 3.5%.

The Positives

+ 1Q23 results beat on both top and bottom line. META issued 1Q23 revenue of US$28.6bn, 3% YoY (6% YoY in constant currency), beating estimates by about 3%, and the top end of its own 1Q23e revenue guidance (US$28.5bn). This outperformance was led by a 26% YoY increase in ad impressions, and strong spend from Chinese advertisers’ outbound spending. E-commerce and Healthcare were the 2 leading contributors to YoY ad revenue growth. 1Q23 EPS of US$2.20 also beat estimates by ~10% as the company continued to show improvements in cost efficiencies as expense growth slowed to 11% YoY (4Q22: 22% YoY) – Sales & Marketing expenses were down 8% YoY.

+ AI continues to drive improvement in ad tech. Investments in AI capabilities continue to be the backbone driving product improvements. AI recommendations drove >24% increase in user time spent on IG, with Reels monetisation efficiency up >30% on IG, and >40% on FB. With the help of AI, we do expect the gap between Reels monetization vs Feed/Stories to continue narrowing, with META mentioning that this could reach neutrality by early 2024.

+ 2Q23e guidance of 7% YoY revenue growth showing potential pickup in growth trends. META issued optimistic revenue guidance for 2Q23e, with a range of US$29.5bn-32bn indicating a 7% YoY growth taking the midpoint, and a 11% YoY growth taking the high end of the range – implying some acceleration in revenue trends, with FX expected to also be less of a headwind moving forward.

The Negative

- Profit declined YoY, though less than prior quarters. META announced 1Q23 PATMI of US$5.7bn, -24% YoY, as expenses continued to grow faster than revenue (10% YoY vs 3% YoY), and a slightly higher tax rate of 22% vs 16% in 1Q22. However, YoY decline in PATMI was significantly better than prior quarters (3Q22: -52% YoY, 4Q22: -55% YoY), with a resumption in earnings growth on the horizon due to significant cost efficiencies and FX headwinds neutralising.

• META recently announced another round of job cuts, laying off ~10,000 (~12% of current workforce), and further removing ~5,000 vacant positions. META’s plans include removing multiple layers of management, and automating more functions to improve efficiency.
• We reduce FY23e OPEX by ~3% as a result of the planned job cuts. As a result, FY23e EBITDA/PATMI is increased by 3%/4% respectively. We maintain ACCUMULATE with a raised DCF target price of US$200.00 (prev. US$182.00), a WACC of 7.1%, and a terminal growth rate of 3.5%.

Update

Job cuts should help to further contain expenses growth. META announced that it would be laying off ~10,000 people (~12% of current workforce), and will also be eliminating another ~5,000 vacant job positions as it continues to streamline its workforce and contain its expenses. YoY headcount growth has been declining over the last 3 quarters – as YoY revenue has begun to contract, and we do expect this to drop drastically for 1Q23e as the job cuts take into effect, especially compared with 1Q22 when hiring was still rampant with headcount growth around 27%. OPEX growth is expected to drop as well, although not as significant given the anticipation of sizeable severance-related charges. META incurred restructuring charges of US$4.2bn in 4Q22 after it performed similar cost-cutting initiatives – US$3.2bn from the consolidation of facilities and restructuring of data centre assets, and US$1bn in severance-related charges.

Maintain NEUTRAL with a raised target price of US$200.00.

As a result of the planned job cuts, we reduce FY23e OPEX by ~3% to be roughly in line with FY22 levels. FY23e EBITDA margins are increased by 120bps to 37.0% due to the reduction in OPEX, offset slightly by expected severance-related charges, with net margin also increased by 100bps to 22.8%. We maintain NEUTRAL with a raised DCF target price of US$200.00 (prev. US$182.00), a WACC of 7.1%, and a terminal growth rate of 3.5%.

•  4Q22 revenue beat expectations by 3%, with adj. earnings (excl. US$4.2bn restructuring charges) beating by 58%. FY22 revenue/adj. PATMI at 101%/114% of our FY22e forecasts.
•  Committed to streamlining costs moving forward, and focusing on improving efficiencies with AI. FY23e total expense guidance reduced by US$5bn, 5% YoY growth.
• Digital advertising outlook weak, Meta guided 1Q23e revenue contraction of -2% YoY.
• We downgrade to NEUTRAL with a raised DCF target price of US$182.00 (prev. US$113.00) to account for an expected 9% increase in EBITDA margins over the next 2 years due to a sharp reduction in expenses. We cut FY23e revenue by 13% on continued uncertainty in digital advertising demand, but also reduce FY23e CAPEX by 15%, and total expenses by 9% to reflect a slowdown in expenses. As a result, FY23e net margin is reduced to 22% (FY22: 20%). We reduce our WACC to 7.1% to account for an increase in debt in relation to equity, and maintain our terminal growth rate of 3.5%.

The Positives

+ Revenue beat expectations on higher holiday ad sales, continued user growth. 4Q22 revenue came in at US$32.2bn, 3% above our forecasts, but still representing a decline of 4% YoY. Revenue was driven by a 23% increase in ad impressions, and strong YoY growth in the travel and healthcare verticals. Active users on Meta’s family of apps continued to grow steadily, increasing 4% YoY to 3.74bn.

+ Laser focused on controlling expenses moving forward. As mentioned during its previous 3Q22 earnings call, Meta remains fully committed to streamlining costs moving forward as it transitions from a phase of hyper growth into a phase of maturation and efficiency. The company plans on: 1) reducing CAPEX by improving its data centre architecture to be more flexible and cost effective; 2) slowing headcount growth as it looks to lean out its management layers; and 3) leveraging AI to increase efficiency and monetization of its products. The expected reduction in expenses should provide an immediate respite to the company’s shrinking margins. 4Q22 total expenses was US$26bn, a 22% YoY increase. Guidance for FY23e total expenses was reduced by 5% to a range of US$89bn-95bn, with FY23e CAPEX reduced by 12% to US$30bn-33bn.

The Negative

- Near-term digital advertising demand expected to remain weak. Meta guided 1Q23e revenue to be in the range of US$26bn-28.5bn – approx. -2% YoY contraction, indicating continued expected weakness in digital advertising demand. FX is also expected to be about a 2% YoY headwind. However, we do expect growth to expand throughout the year as Reels monetization and advertising performance continues to improve.

• 3Q22 revenue in line with expectations, earnings miss by 12%. 9M22 revenue/PATMI at 68%/60% of our FY22e forecasts.
• Earnings hurt by 19% rise in expenses; Reality Labs segment continuing losses; guided to another quarter of negative revenue growth.
• We cut our FY22e revenue/PATMI forecast by 7%/23% to account for slowing revenue growth, higher-than-expected total expenses and increasing FX headwinds. We also increased our total expenses forecast for FY23e. We downgrade to an ACCUMULATE recommendation with a lowered DCF target price of US$113.00 (prev. US$221.00).

The Positive

+ Reels engagement seeing continued momentum. Meta continues to gain time spent share on competitors like TikTok, with Reels seeing more than 140bn daily plays – 50% increase from 6M ago, and driving incremental time spent on Meta’s family of apps. Reels growth presents near term headwinds since it does not monetize as quickly as feed or stories, but is expected to even out over the next couple of years as monetization improves. LTM revenue run rate for Reels was around US$3bn in 3Q22, 3x more than 2Q22.

The Negative

- Earnings cut in half due to jump in expenses. Meta announced EPS of US$1.64 for 3Q22, almost 50% lower than a year before. The main reasons were YoY revenue contraction of about 5%, and a 19% YoY increase in total expenses. R&D saw a 45% YoY increase as Meta continued hiring technical roles to support its Family of Apps segment. However, the company did mention that they expect overall headcount to remain roughly the same until the end of FY23e, which should help to ease YoY growth in total expenses.

- Reality Labs segment running deeper into the red. Revenue from Reality Labs was down 49% YoY as a result of slowing Quest 2 sales – VR headset. Expenses remained high, with the operating loss for the segment at US$3.7bn for 3Q22, up 40% YoY. Operating loss YTD was US$9.4bn, an increase of 37% YoY. Continued losses from Reality Labs is concerning given the uncertainty surrounding its timeline to profitability, and a growth stagnation in Meta’s core digital advertising revenue.

- Guidance for another quarter of negative revenue growth. Meta guided to 4Q22 revenue range of US$30bn-32.5bn, representing a 7% YoY contraction taking the midpoint, with an approximate FX headwind of 7%. The sluggish guidance reflects continued weakening trends in digital advertising, and an uncertain macroeconomic environment.

• 2Q22 revenue in line with expectations, with earnings missing target slightly. 1H22 revenue/PATMI at 43/42% of our FY22e forecasts.
• Reels driving positive user growth across all metrics for 2Q22, with 15% YoY increase in ad impressions. Business messaging potential additional revenue driver because of its growing popularity amongst SME business owners.
• Soft revenue guidance for 3Q22 from slowing advertising demand and 600 basis points YoY revenue headwind from strengthening US dollar.
• We lower our FY22e revenue/PATMI forecast by 5/10% to account for slower revenue growth, slightly higher-than-expected R&D expenses, and increasing FX headwinds. We maintain a BUY recommendation with a lowered DCF target price of US$221.00 (prev. US$231.00).

The Positive

+ Reels driving positive user growth, increasing ad impressions. META recorded 3.65bn Family Monthly Active People (MAP) for 2Q22, increasing 4% YoY, with ad impressions also increasing 15% YoY. User growth and engagement continues to be driven by strong 30% QoQ Reels growth, particularly in the APAC and Rest of World regions. This is good news for META especially as it shifts its focus into short-form video formats like Reels.

+ Business messaging a potential lever of revenue growth. Once clicked, Click-to-Message opens a chat between the user and a business, connecting both parties instantly, and is proving to be particularly popular amongst SMEs in Brazil and Mexico. Business messaging products like Click-to-Message are already a multi-billion dollar business for the company – with strong double-digit YoY growth and more than 1bn users, which we believe should unlock an additional lever of revenue growth for META moving forward.

The Negatives

- Earnings miss due to higher than expected expenses. META recorded 2Q22 EPS of US$2.46, missing estimates of US$2.61, largely due to higher-than-expected expenses, which increased 22% YoY. Headcount increased by 32% YoY, mainly in tech functions, above expectations. However, META also mentioned that it expects headcount growth to slow for the rest of the year as they reduce hiring.

- Soft 3Q22 revenue guidance due to continuing weakness in advertising, and 6% FX headwinds. META issued very soft revenue guidance for 3Q22, in the range of US$26bn-28.5bn – representing a 6% YoY decline. Broader macroeconomic uncertainty, softening demand for advertising, and an approximate 6% YoY headwind from a strengthening US dollar, were cited as the main reasons for the expected weakness.

Outlook

META guided 3Q22 revenue to be US$26bn-28.5bn, a 6% YoY decline, and relatively flat compared with 2Q22, with this guidance reflecting weakening revenue trends that are expected to continue. Meta also lowered its FY22e guidance on total expenses from US$87bn-92bn, to US$85bn-88bn, as it slows hiring and overall expenses to account for a more challenging macro environment.

META’s transition from Feed/Stories to Reels seems to be ahead of schedule, with management seemingly optimistic about its results so far. As advertisers shift more spending on Reels, average price per ad declined 14% YoY. In the long-run, this should be a positive for META as it continues to compete with other short-form video players like TikTok for advertising dollars.

Management reiterated its focus on investing more into its Artificial Intelligence (AI) and Machine Learning capabilities to drive better user experiences on its platforms and grow video monetization. The increasing capabilities in AI will also help to deliver better personalized ads using less data, helping to combat the negative effects from Apple’s third-party privacy changes.

META is no doubt in a transition period, with margins contracting and revenue slowing in the near-term. However, we believe in its ability to get through this transition period, especially with its long-term investments in AI. Free Cash Flow (FCF) for the quarter was US$4.5bn, with the company also repurchasing US$5.1bn of shares.

We reduce our FY22e revenue/PATMI forecasts by 5/10% on the back of slowing revenue growth as a result of weakness in consumer advertising, and increasing FX headwinds.

• 1Q22 earnings in line with expectations. 1Q22 revenue/PATMI at 21/22% of our FY21e forecasts. EPS beat consensus estimates of by 6% as a result of lower than expected total expenses.
• Positive user growth across all metrics for 1Q22, with Facebook DAU rebounding from negative QoQ growth in 4Q21.
• Continued negative impact on revenue from suspending operations in Russia, and from strengthening US dollar.
• We maintain a BUY recommendation with a DCF target price of US$312.00 (WACC 6.6%, g 3.5%).

The Positive

+ User growth across all metrics a positive sign. Meta recorded 3.64bn Family Monthly Active People (MAP) for 1Q22, increasing 6% YoY, and slightly over 1% QoQ. Specifically for its Facebook platform, Monthly Active Users (MAU) grew 1% QoQ and 3% YoY to 2.94bn, with Daily Active Users (DAU) rebounding from a negative QoQ growth in 4Q21 to a 2% QoQ growth. Overall, across platforms, growth was driven by the APAC region, with most other regions either flat or slightly contracting.

+ Earnings beat consensus estimates of US$2.56, with lower than expected total expenditure. Meta’s EPS of US$2.72 for the quarter beat consensus estimates of US$2.56, partially due to a lower than expected total expenditure for the quarter, indicating that the company’s slowdown in earnings was not as bad as analysts feared. Operating Income was US$8.5bn, with operating margins of 31%, compared with 43% in 1Q21. Meta also conducted share buybacks of US$9.4bn for the quarter.

The Negatives

- Continued revenue headwinds for 2Q22 due to strengthening USD, negative impact from Russia/Ukraine conflict, and Apple’s ATT* changes. Revenue headwinds continue in Russia, where its services are totally suspended. Also, the company estimates a 3% headwind to YoY growth in revenue for 2Q22 as a result of a strengthening US dollar. Apple’s ATT changes continue to pose a headwind for Meta, with its changes decreasing the effectiveness and the tracking capabilities of Meta’s targeted ads. The company said that overcoming these challenges using AI and machine learning will continue to be a long term challenge that it is focused on.

*App Tracking Transparency (ATT) – Changes by Apple during its iOS 14 update that allows users the ability to choose what kind of data, and to whom they wish to give their data to (privacy safeguard)

Outlook

Meta guided 2Q22 revenue to be in the range of US$28bn-30bn, a 1-7% QoQ increase compared with 1Q22, with this guidance reflecting revenue trends that are expected to continue. This guidance is also in line with our estimates. Taking the midpoint guidance of US$29bn (0% YoY growth), 1H22e revenue will work out to be around 43% of our FY22e revenue estimates.

Meta also lowered its FY22e guidance on total expenses from US$90bn-95bn, to US$87bn-92bn, but still expected the majority of expense growth to come from the Family of Apps segment, as it increases Data Centre capacity, and invests heavily in Artificial Intelligence to improve overall efficiency.

Regulatory legislation continues to be an overhang for the company, with Meta working together with the EU to finalize the wordings of the newly created EU Digital Markets Act, which was primarily created to be a “gatekeeper” for big tech companies, and prevent them from indulging in monopolistic practices.

Maintain BUY with an unchanged target price of US$312.00

We maintain a BUY rating with an unchanged target price of US$312.00, with a WACC of 6.6%, and a terminal growth rate of 3.5%.

• 4Q21 earnings in line with expectations. FY21 revenue/PATMI at 102/105% of our FY21e forecasts
• Apple iOS 14 privacy changes decreases the accuracy of FB’s targeted ads, making it increasingly tougher to track and measure the outcomes of these ad campaigns
• The company guided weak 1Q22 revenue growth of 3-11% and FY22e expenses to rise at least 26% to US$90bn-95bn. FB is also undertaking major capital expenditure of US$29bn-34bn to beef up its IT infrastructure.
• We maintain a BUY recommendation with a reduced DCF target price from US$424.00 to US$312.00 (WACC 6.6%, g 3.5%). Our target price is lowered due to growth pressures from increased competition and reduced earnings of 24% due to increased expenditures.

The Positive

+ Revenue growth still positive for the quarter. FB reported 20% YoY revenue growth for 4Q21, and 37% YoY revenue growth for FY21. This was supported by a 9% YoY increase in user growth, 6% YoY increase in prices of digital ads, and 13% YoY increase in ad impressions.

The Negatives

- Reduced effectiveness of targeted advertising due to Apple iOS 14 privacy changes. Apple’s iOS 14 privacy changes continue to affect FB’s core advertising business, decreasing the accuracy of its targeted ads, and making it tougher for the company to track and measure the outcomes of these ad campaigns. As a result, advertisers have begun reallocating portions of their ad budget away from FB, and towards competitors like GOOGL and AMZN.

- Increasing competition from TikTok and other social media companies. The emergence and growth in popularity of short-form video apps like TikTok continue to be a threat to FB, particularly with its younger users. User growth has begun to slow down, with only 0.3% QoQ for 4Q21. As a result, FB has begun transitioning its own services towards more short-form video like Reels, in an effort to better serve its younger audiences. They have also scaled up hiring in this area, leading to higher total expenses and lowered margins - by almost 10%. This shift in format could be accompanied by near term pressures on impression growth, as well as slower monetization rates.

- Weak 1Q22 and FY22e guidance of increased expenses. FB guided weak 1Q22 revenue growth of just 3-11%, impacted by headwinds in both ad impressions and prices. It also expects FY22e total expenditure to rise at least 26% to US$90bn-95bn on the back of increasing CAPEX by at least 56%, as it scales up investments in tech talent and IT infrastructure to better compete with its competitors.