Business segments face mixed prospects amid heavy investment
Meta’s $180+ billion ad business remains the cash machine funding everything else.
- Digital advertising continues as the profit engine
With AI-powered ad tools showing promise through 30% adoption driving a 5% boost in Reels conversions, revenue per user hit $49.63 (+11.28% year-on-year), proving Meta can still squeeze more from its user base. However, concerns persist as ad load approaches limits across Instagram and Facebook. Average revenue per user (ARPU) growth increasingly relies on pricing power rather than volume, while Asia-Pacific disappointed in Q1 ($8.22 billion versus $8.42 billion expected) as Chinese exporters pulled back amid tariff fears.
Meta’s AI strategy faces expensive reality as the company defies Silicon Valley orthodoxy. While competitors guard their models, Meta gives away Llama for free, betting on ecosystem dominance. The $60-70 billion 2025 capital expenditure (CapEx) plan shows serious commitment, with revenue per customer already jumping to $49.63 (+11.28% year-on-year), proving AI can enhance monetisation.
Reality Labs continues burning cash with no end in sight, consuming $4 billion quarterly with no profitability visible. Critics see Mark Zuckerberg’s expensive hobby, but context matters. With $96 billion in operating cash flow, Meta can afford big bets. The metaverse vision has evolved beyond virtual reality (VR) headsets to owning the next computing platform, augmented reality (AR) glasses, neural interfaces, or something unimaginable.
WhatsApp represents significant untapped potential after 11 years and $19 billion in investment. Meta is finally monetising WhatsApp, and the opportunity is staggering. Currently generating just $1-2 billion annually from three billion users, Wolfe Research projects a $30-40 billion revenue opportunity from business messaging alone.
Five key factors for 30 July
Beyond headline numbers, five factors will determine Meta’s post-earnings trajectory:
- AI return on investment (ROI) metrics: concrete examples beyond ‘engagement is up’
- Q3 guidance tone: expected decline needs context
- Reality Labs discipline: signs of cost control or strategic focus
- Geographic mix: Asia-Pacific recovery after Q1 disappointment
- WhatsApp monetisation timeline: clear revenue targets and implementation