Written by: Sophie Lund-Yates | Hargreaves Lansdown
- Revenue rose 27% in the first quarter, compared to expectations of a 26% increase.
- Daily active people rose 7% to 3.24bn.
- Meta has upgraded its capex target to $35-$40bn this year, as it expects to “aggressively” invest in its AI research and development ambitions.
- The group is actively monitoring the regulatory landscape.
Meta’s substantial investment in AI has the ability to hugely improve engagement with its platforms, and therefore the amount marketers are prepared to pay for ad space. The group has indeed surpassed expectations in a time when digital advertising uncertainty remains rife. Over fifty countries are due presidential elections this year, which hugely increases uncertainty, and digital spending tends to move down when risks increase. This speaks to Meta’s enormous scale and importance to modern-day marketers. Its fortunes are probably also being bolstered by TikTok’s uncertain future in the US. One potential outcome from all this turmoil could well see TikTok added to the Meta family.
For all Meta’s bold AI plans, it can’t afford to take its eye off the nucleus of the business – its core advertising activities. That doesn’t mean ignoring AI, but it does mean that spending needs to be targeted and in-line with a clear strategic view. The ‘see what sticks’ method of years gone by won’t be tolerated by the investor base. Meta’s resources are vast, but not infinite, and its digital advertising market share needs defending at all costs, and that means being disciplined first, but in tandem with some moon shots in the background. The language around spending plans has become bolder once more, and this could be what’s spooking markets.
Looking further ahead, the biggest risk remains regulatory, with Meta admitting it continues to monitor the landscape. Biden’s anti-tech stance could accelerate if he’s handed another term, with outcomes on a broad spectrum. One end could see verbal slaps on the wrist, the other extreme could be the forced breakup of conglomerates if they’re deemed to have too much influence or are contributing to anticompetitive practice. The reality would likely be somewhere in the middle. Meta has more than enough resources to throw at legal challenges, but that doesn’t rule out the risks of ups and downs in market sentiment.
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