+ 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.
– 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.