The Meta-owned company,which trades as Facebook Australia,made $1.34 billion from advertisers during the year,almost $100 million more than in 2022 despite a market-wide downturn. However,more than a billion dollars of that local revenue was funnelled to an international subsidiary.
It was a good quarter for Meta chief Mark Zuckerberg,but investors don’t like the outlook for sales and spending.Bloomberg
Meta chief executive Mark Zuckerberg said on Thursday that it had been “a good start to the year”,with the company delivering global revenue growth of more than 27 per cent for the first quarter – ahead of analyst expectations – and profits doubled to $US12.37 billion ($19 billion).
Global revenue was reported at $US36.5 billion,which Zuckerberg attributed to the company’s AI efforts and “healthy growth across our apps”.
The picture locally is skewed by the way Meta reports its finances. Its final reported Australian revenue totalled $209 million,down 7 per cent,with $1.14 billion sent offshore through what it describes as a “purchase of services” agreement. Under the agreement,Facebook’s Australian operations pay a related Facebook subsidiary located offshore for the advertising space,thereby reducing the total amount of revenue generated in Australia.
Companies pay taxes on profits,not revenue and Meta says it pays for advertising inventory to other related parties “in accordance with an advertising reseller agreement”.
Meanwhile,Facebook reported $47.1 million in profits for 2023,up from $34.7 million in 2022.
The result comes as a stalemate continues over the renewal of the social media giant’s commercial deals with Australian news publishers. Last month,Meta said it any of the 13 deals it signed in 2021,prompting a bipartisan backlash in Canberra,as well as criticism from most media companies.
The government is awaiting advice from the Australian Competition and Consumer Commission on its ability to designate Meta under the news media bargaining code,and the potential impact for publishers.
Shares tumbled more than 11 per cent in after-hours trading after the social networking company projected the same revenue for the second quarter when analysts expected $US38.2 billion,and raised its cost guidance for the year to between $US35 billion and $US40 billion. Earlier this year,it estimated expenses related to items such as servers,AI hardware and data centres would be $US30 billion to $US37 billion.
Facebook owner Meta has refused to continue paying for news in Australia,announcing it will end its deals with local publishers when they expire this year.
The stock was up 39 per cent this year so far at market close and has been trading near all-time highs for the past month,in part reflecting excitement around AI.
“We expect capital expenditures will continue to increase next year as we invest aggressively to support our ambitious AI research and product development efforts,” chief financial officer Susan Li said in a statement.
Meta has been spending up to compete on AI against tech peers such as Alphabet (Google’s parent company) and Microsoft,which is driving some of the increase in expenses. The company announced plans for a new $US800 million data centre in January,and is also developing its own chips for artificial intelligence services. Meta is also working on several new iterations of its large language model,known as Llama,for powering chatbots and other AI services.
In the previous quarter,Zuckerberg announced a $US50 billion stock buyback in addition to the company’s first-ever quarterly dividend,an effort to placate investors frustrated by the company’s aggressive spending on technologies that have yet to pay off. Zuckerberg has spent years ploughing money into efforts to build the so-called Metaverse,a virtual world in which he hopes people will one day play and work.
Reality Labs,the Meta division focused on its futuristic bets,reported a loss of $US3.85 billion for the first quarter,roughly the same as a year ago. That division,which also oversees VR headsets and Meta’s Ray-Ban smart glasses,reported an annual loss of more than $US16 billion in 2023.
The company reiterated its broader 2024 spending plans,saying it would shell out $US96 billion to $US99 billion for the calendar year,up slightly from a low-end target of $US94 billion to $US99 billion. It previously said much of that would go toward infrastructure costs in addition to long-term bets on augmented and virtual reality.
Meta’s mixed report comes on the same day that US President Joe Biden signed a bill into law that would or face a ban in the US. The potential elimination of a major competitor could give a boost to Meta’s advertising business since its short-video offering Reels is a clone of TikTok.
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