Hi YXI friends,

Not many businesses have as direct an impact on the global population as Meta. Perhaps only Alphabet can rival Meta’s scale in their consumer reach. Everyday, 3.4 billion people use at least one of Meta’s apps.

Meta is on a mission to make lots more money out of every user bring personal superintelligence to everyone. Until this quarter, we had only seen huge investments instead of tangible AI monetisation. However, this quarter could finally mark the beginning of the real AI cycle, in which the AI leaders start a new phase of sustained growth.

At the time of writing, META shares are up 12% from Wednesday’s close. Was this market reaction well deserved? Let’s find out!

Table of Contents

• 1. Business Growth

• 2. The 5 AI Pillars

• 3. Profitability

• 4. Valuation

• 5. Technical analysis

• 6. Machine Learning

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. Business Growth

Meta’s Business Segments

Meta reports its business results in two segments, “Family of Apps” and “Reality Labs”.

However, 99% of META’s revenue is driven by advertising under “Family of Apps”. Reality Labs is a long-term strategic investment with substantial ongoing losses. For the sake of our financial analysis, we can ignore this area until it at least 10x.

Quarterly Revenue

In Q2, Meta saw a revenue growth of 22% YoY to $47.5 billion, an important acceleration from Q1’s 16%.

Meta’s revenue comes from a combination of ad impressions and ad prices. In Q2, ad impressions rose by 11% YoY (vs. 5% in Q1), while the average price per ad rose by 9% (vs. 10% in Q1).

While I had previously thought that Meta app impressions already reached a saturation point, Meta did manage to squeeze in strong growth. Meta’s impression growth in Q2 was primarily driven by AI recommendation improvements.

For Q3, Meta has guided a revenue midpoint of $49 billion, representing 21% YoY growth, which should be handsomely beaten.

Geographical Split

US and Canada are Meta’s biggest market in terms of advertising revenue, contributing to 43% of the Q2 result. This market is as large as Europe and Asia combined, at 24% and 20% respectively.

Despite its large base, US & Canada grew by an impressive 21% YoY in Q2.

Europe grew by 24%, followed by Rest of World at 23%.

APAC grew at 18.5%, which is faster than Q1 but had seen stronger growths in Q2 and Q4 2024.

Meta believes that there is still strong potential to increasing user penetration and monetisation.

TTM Revenue

Meta’s overall revenue reached 179 billion on a trailing twelve months basis. While the TTM growth rate is at 19%, I expect an acceleration in the incoming quarters.

2. The 5 AI Pillars

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