Meta (aka Facebook) announced big earnings (beating expectations and raising guidance). The shares were up +15% in afterhours trading. Here are 6 key takeaways:
1. The new $0.50 quarterly dividend is a behavioral trick to make investors think Zuck is more disciplined (the perception that he wasn’t is what caused the shares to tank in 2022), but he still has more than 50% voting rights (NOT shareholder friendly) and he would invest all of the billions of dollars META prints if he could figure out how to spend it fast enough (innovation is good). Also, the low start for the dividend suggests it may go the annual dividend growth route like Microsoft and Apple.
2. Meta’s compute power is beyond insane: Per Zuckerberg:
“by the end of this year we'll have about 350k H100s and including other GPUs that’ll be around 600k H100 equivalents of compute. We're well-positioned now because of the lessons we learned from Reels. We initially under-built our GPU clusters for Reels, and when we were going through that I decided that we should build enough capacity to support both Reels and another Reels-sized AI service that we expected to emerge so we wouldn't be in that situation again. At the time the decision was somewhat controversial and we faced a lot of questions about capex spending, but I'm really glad that we did this.”
3. Ads are still ~97% of Revenue: It may seems absurd Zuckerberg talks so much about Meta’s other products, but that’s what people used to say about the family of apps (FB, Instagram, Messenger, WhatsApp) before they printed so much money.
4. WhatsApp is growing in the US: It’s odd for a big product of a big US company to gain traction outside the US first, but the non-US people are bringing it home to the US, and the monetization power is incredible. US growth for WhatsApp is encouraging for Meta.
5. Zuck is thinking BIGGER on #AI: Per the call, he now aspires:
“everyone who uses our services will have a world-class AI assistant to help get things done, every creator will have an AI that their community can engage with, every business will have an AI that their customers can interact with to buy goods and get support, and every developer will have a state-of-the-art open source model to build with.”
6. Meta is building custom chips! Per Zuck: “we're also designing novel data centers and designing our own custom silicon specialized for our workloads.”
Overall, Meta is an incredible business. It absolutely prints money, and it also invests (on new innovation) more heavily than basically everyone else. We currently own shares of Meta in our Blue Harbinger Disciplined Growth Portfolio, and have absolutely zero intention of selling. Long $META.