+ 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.
– 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.