Meta Platforms: More expensive advertising and lower taxes for more profit

3.43 billion people accessed Facebook, Instagram, Messenger, Threads or Whatsapp at least once in March, says operator Meta Platforms (excluding Messenger Kids). That is an increase of around six percent year-on-year. Meta has increased the number of ad placements to almost the same extent. Despite this, the data company was able to increase average advertising prices by ten percent.

As advertising continues to be Meta's main source of income, this means a further increase in revenue. Advertising revenue rose by 16.2 percent to 41.4 billion US dollars, while total revenue increased by 16.1 percent to 42.3 billion dollars. At the same time, operating and distribution costs as a percentage of revenue have remained stable; Meta has slightly increased its research and development expenditure, while it has almost halved its general and administrative costs from nine to five percent.

The logical result is a higher operating cash flow, higher margin and higher operating profit. The operating cash flow has swelled by around a quarter to 24 billion dollars. The margin has risen from 38% in Meta's first quarter of 2024 to 41% in the first quarter of 2025. Two years ago, in the first quarter of 2023, it was 25 percent. Operating profit increased by 27% year-on-year to 17.6 billion dollars.

More profit, fewer taxes

The financial figures published on Wednesday evening show that the operating profit comes from the core products Facebook, Instagram, Messenger, Threads and Whatsapp. Reality Labs, which is supposed to create the Metaverse that gives the group its name, is still making billions in losses (+9.5% to an operating loss of 4.2 billion dollars).

The Group has even more than doubled its profits from interest and other financial investments to 827 million dollars. Overall, pre-tax profit for the first quarter of 2025 amounted to 18.4 billion dollars, an increase of around 30 percent.

To the delight of the management, the tax burden has fallen significantly, from 13% to just 9%. The decrease is so significant that even the absolute amount of tax provisions has fallen, from 1.8 to 1.7 billion dollars. The result is a net quarterly profit of 16.6 billion dollars, which is around 35 percent higher.

Share price rises after the close

For the current quarter, Meta management expects sales of 42.5 to 45.5 billion dollars, which would mean growth of nine to 16 percent year-on-year. Annual operating expenses are expected to be between 113 and 118 billion dollars, one billion dollars less than previously planned.

However, capital expenditure will increase significantly in 2025, from the originally planned 60 to 65 billion dollars to 64 to 72 billion dollars. The reason for this is Meta's bet on artificial intelligence; CEO Mark Zuckerberg wants to launch the best, personalized AI service on the market that remembers everything the respective user does on Meta. This requires more additional data centers. Hardware costs have also risen, not least thanks to high customs duties.

Institutional investors are impressed. Meta's share price has risen by a good five percent in post-market trading.

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