Update shared on10 Feb 2025
Fair value Increased 7.40%Sustained Growth and Diversification Of Family Of Apps
- Meta’s Family of Apps (FoA) saw a significant increase in daily active users, adding 60 million quarter-over-quarter in Q4 2024. This growth is a testament to Meta’s ability to maintain its dominance in social media, with over 1 billion new DAUs added since Q1 2020.
- The continued expansion resulted in sustained ARPU growth of 8.6% year-over-year, reaching $14.25 in Q4, which is getting close to my $15 target. Ad revenue grew by 21% in Q4 2024, driven by a 14% increase in average ad prices and a 6% rise in ad impressions. Meta’s Advantage+ shopping campaigns surpassed a $20 billion annual run rate, pointing to the effective AI-powered ad solutions. However, there are concerns about whether this growth can be sustained, particularly as advertisers become more cautious in a potentially slowing economy.
- Meta’s Threads app has grown strongly, reaching 320 million monthly active users by Q4 2024. This aligns with my expectations of a successful launch of a Twitter competitor.
Meanwhile, WhatsApp continues to gain traction, particularly in the U.S., where it now boasts over 100 million monthly active users. These platforms are expected to contribute significantly to Meta’s revenue diversification, reducing reliance on its core advertising business. However, the challenge remains in monetizing these platforms effectively, as WhatsApp’s revenue growth, while impressive, still represents a small fraction of Meta’s overall revenue.
Significant AI Capex Investments
- Meta plans to invest between 60 and 65 billion in AI infrastructure in 2025, almost double its spending in 2024. This investment includes the deployment of over 1.3 million GPUs, focusing on custom silicon like MTIA to optimize compute efficiency. The company’s commitment to AI infrastructure aims to maintain its competitive edge in the rapidly evolving AI landscape.
- The emergence of DeepSeek, an open-source AI model from China, has raised questions about Meta’s CapEx spending. While Meta views DeepSeek as an opportunity to improve efficiency rather than a threat, there is skepticism about whether the company can effectively integrate these cost-saving measures into its existing infrastructure.
- If Meta fails to adapt quickly, it risks falling behind in the AI race despite spending almost 40% of its 2024 operating income on AI infrastructure. Meta’s history of chasing the next big thing, from the Metaverse to AI, has raised concerns about whether the company is spreading itself too thin. The Reality Labs segment, which focuses on AR/VR and the Metaverse, has accumulated over $60 billion in losses since its inception.
Owing to the faster than expected ARPU growth, I'm minimally increasing my revenue expectation, but keeping an eye on CAPEX for further developments.
Disclaimer
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