Meta makes more profit, but does not pay more taxes

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Meta Platforms has delivered a new record quarter. Advertising revenue in Europe exceeded ten billion US dollars in a quarter for the first time, and in the US and Canada it exceeded 20 billion dollars for the first time. From now on, Threads will also be used for advertising. This is according to publications by the data company on Wednesday.

According to this, Meta generated 48.4 billion US dollars in revenue in the fourth quarter, 21 percent more than in the fourth quarter of 2023. Meanwhile, expenditure only increased by five percent to 25 billion dollars. It should be noted here that Meta had to record 1.55 billion dollars in legal expenses in the same period of the previous year, which were not incurred in the current reporting quarter. If this is excluded, costs would have risen by twelve percent. Although stronger, this is still significantly weaker than income.

This results in a 43 percent higher operating profit of 23.4 billion US dollars; the margin has risen from 41 to 48 percent. The operating cash flow has increased by 44 percent and reached almost 28 billion dollars, which corresponds to the total long-term Group debt. In other words, Meta could have spent 3,500 dollars more every second in the three months under review and still have more money in its coffers than at the beginning of the second.

Profit before tax has increased by 40 percent to 23.6 billion dollars. At the same time, the expected tax burden has fallen from 2.8 to 2.7 billion dollars, resulting in a net profit of 20.8 billion dollars. This is an increase of almost 49 percent.

Metaverse turnover does not fall

As in the same quarter of the previous year, the eponymous Metaverse only achieved a turnover of 1.1 billion dollars. The lion's share of 47.3 billion dollars (+21%) came from the Group's classic applications (Facebook, Instagram, WhatsApp, Messenger), and there again almost exclusively from advertising (+21% to 46.8 billion dollars). Other revenue from the four classic applications is limited to half a billion dollars (+55%, Meta owes this growth primarily to business customers who pay WhatsApp fees).

The use of machine learning in the display of advertising is paying off, reported CFO Susan Li. The AI model used for this, called Andromeda, is the result of a partnership with Nvidia and has made the algorithm for pre-selecting potentially displayed advertising 10,000 times more complex. This means that ads are tailored even more closely to the recipient. Measured against certain internal criteria, the “quality” of the advertisements shown has increased by eight percent.

Meta continues to pursue its advertising business model unwaveringly. The number of paid advertisements increased by six percent in the fourth quarter, particularly in Asia and the Pacific region. At the same time, Meta was able to generate 14 percent higher prices on average. In the current quarter, the company will also begin to populate threads with advertising. The Twitter clone reportedly had 320 million active users in December. However, the management does not expect any significant income from advertising on Threads until next year.

If you are looking for a fly in the ointment, you might find it in the video and metaverse areas. For the latter, Zuckerberg is hoping for a boost from “visually breathtaking” innovations that are due to arrive this year. Video usage, on the other hand, has already risen sharply in 2024; at Facebook in the USA in the double-digit percentage range, at Instagram even in the double-digit range worldwide. New algorithms are expected to continue this trend in 2025. The disadvantage of video is that it is pricier and, so far, offers less advertising space than content consisting of text and still images.

Annual figures for 2024

In 2024 as a whole, Meta Platforms generated revenue of 164.5 billion dollars (+22%), while expenditure increased by just eight percent to 95.1 billion dollars. Operating profit jumped by 48% to 69.4 billion dollars. The margin improved from 35 to 42 percent. The operating cash flow increased by 29 percent to 91.3 billion dollars.

Pre-tax profit has risen by 49 percent to 70.7 billion dollars. At the same time, the expected tax burden is 8.3 billion dollars, the same as in 2023, resulting in a 59% year-on-year increase in annual net profit (62.4 billion dollars). Meta had 74,000 employees at the end of 2024. This is ten percent more than at the beginning of the year.

Outlook

For the current quarter, Li expects 8 to 15 percent more revenue than in the first quarter of 2024. Expenses will increase by 20 to 25 percent in 2025, with infrastructure costs in particular having an impact.

After all, CEO Mark Zuckerberg is planning to give his users a personalized AI bubble. This will require more and more servers with a stronger power supply. A smaller contribution to the increasing server load is made by the increased use of videos in Meta's social networks.

Meta has already considered the fact that the expected lifespan of the servers is longer. They are now expected to last an average of five and a half years. This will reduce depreciation by 2.9 billion dollars in 2025, the accountants expect. Meta shares gained more than two percent in after-hours trading following the announcement of the quarterly and annual figures.

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