Its earnings season again! Let's discuss Meta's third quarter financial results! [开心]
Background of Meta
Previously known as Facebook, Meta is an American online social media company founded in 2004 by Mark Zuckerberg. On 28 October 2021, the California-based company changed its corporate name to Meta as it broadens its business beyond social media into the virtual reality (“VR”) space. As part of the rebranding, the Company's stock ticker will change from $FB to $MVRS effective 1 December 2021.
Key Financial Highlights
Annual revenue grew by 35% year-over-year (“YOY”) from US$21.47 billion in Q3 2020 to US$29.01 billion in Q3 2021. It represents a slowdown from the 56% increase in Annual Revenue in Q2 2021.
The quarterly Net Income growth was 17% YOY in Q3 2021, a decrease from 101% in the previous quarter.
Capital expenditures, including principal payments on finance leases, were US$4.54 billion for the third quarter of 2021 (Q2 2021: US$4.74 billion).
Cash, cash equivalents and marketable securities were $58.08 billion as of 30 September 2021. The figure represents a slight decline from US$61.08 billion as of 30 June 2021.
Although annual revenue decelerated compared to Q2 2021's result, it is still remarkable that Meta managed to grow its revenue by 35% especially when we're talking billions, not millions. Advertising revenue has grown by 33% yoy and accounted for 97.5% of Meta's revenue in Q3 2021. Essentially, Meta is generating revenue from the advertisements displayed on its social media sites, Instagram and other third-party affiliated websites. If there are more users, there will be a larger community on its social media platforms. With a larger community, more businesses will be enticed to advertise on its platforms.
You may be pleased to know that Facebook's daily active users were 1.93 billion on average for 30 September 2021, an increase of 6% YOY. Thus definitely helps in its advertising revenue growth. Ka Ching.
Further, Meta announced in its Q3 2021 earnings press release that it will start reporting revenue for a new segment called Facebook Reality Labs in Q4 2021. This new segment will be centred around augmented and virtual reality related systems and content. Meta plans to spend at least US$10 billion this year on Facebook Reality Lab and expects to increase their investments for the next several years. New revenue stream? Ka Ching.
$FB's share price appears to be breaking out of the downward channel at the moment. I would buy some shares along the way.
Opinion
In my opinion, the VR business will disrupt social media and redefine the way we work, live, play and interact with others. Gucci has unveiled collectibles on Roblox and Nike is filing trademark applications to sell virtual products in the online virtual worlds. The Microsoft Teams team has also begun work on bringing Teams to virtual reality. Online assets have limitless potential and this is one of the many reasons why I am bullish on Meta.
Are you Metaverse-ready?
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