Q4 2023 Meta Platforms Inc Earnings Call

Operator: Good afternoon. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the META fourth quarter and full year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

Good afternoon, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the meta fourth quarter and full year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, again, press star 1.

A question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to withdraw your question again press Star one we ask that you limit yourself to one question.

Operator: We ask that you limit yourself to one question. This call will be recorded. Thank you very much.

This call will be recorded thank you very much Ken Doral met as director of Investor Relations you may begin.

Ken Sena: Ken Durrell, META's Director of Investor Relations. You may begin. Thank you.

Ken Sena: Thank you good afternoon, and welcome to meta platforms fourth quarter and full year 2023 earnings conference call.

Ken Sena: Good afternoon, and welcome to META Platforms' fourth quarter and full year 2023 earnings conference call. Joining me today to discuss our results are Mark Zuckerberg, CEO, and Susan Lee, CFO. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. actual results may differ materially from those contemplated by these forward-looking statements.

Ken Sena: Joining me today to discuss our results are Mark Zuckerberg, CEO and Susan Li CFO before.

Speaker Change: Before we get started I would like to take this opportunity to remind you that our remarks today will include forward looking statements.

Speaker Change: Actual results may differ materially from those contemplated by these forward looking statements.

Ken Sena: Factors that could cause these results to differ materially are set forth in today's earnings press release and in our quarterly report on Form 10-Q filed with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The earnings press release and an accompanying investor presentation are available on our website at investor.fb.com. Now, I'd like to turn the call over to Mark. All right.

Speaker Change: Factors that could cause these results to differ materially are set forth in todays earnings press release, and our quarterly report on Form 10-Q filed with the SEC.

Speaker Change: Any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.

During this call we will present, both GAAP and certain non-GAAP financial measures.

Speaker Change: Reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, the earnings press release, and an accompanying investor presentation are available on our website at Investor Dot FB dotcom.

Speaker Change: And now I'd like to turn the call over to Mark.

Mark Elliot Zuckerberg: Hey, everyone. Thanks for joining us. This was a good quarter, and it wrapped up an important year for our community and our company. We estimate that there are more than 3.1 billion people who use at least one of our apps each day. 2023 was our year of efficiency, which focused on making META a stronger technology company and improving our business to give us the stability to deliver our ambitious long-term vision for AI and the Metaverse. And last year, not only did we achieve our efficiency goals, but we returned to strong revenue growth, saw strong engagement across our app, shipped a number of exciting new products like Threads, Ray-Ban META Smart Glasses, and Mixed Reality in Quest I think that being a leaner company is helping us execute better and faster, and we will continue to carry these values forward as a permanent part of how we operate.

Mark Elliot Zuckerberg: Alright, hey, everyone. Thanks for joining us.

Mark Elliot Zuckerberg: This was a good quarter and it wrapped up an important year for our community and our company. We estimate that there are more than $3 1 billion people, who use at least one of our apps each day.

Mark Elliot Zuckerberg: 2023.

Mark Elliot Zuckerberg: It was our year of efficiency, which are focused on making <unk>, a stronger technology company and improving our business to give us the stability to.

Mark Elliot Zuckerberg: To deliver our ambitious long term vision for AI and <unk> and last year not only did we achieve our efficiency goals, but we returned to strong revenue growth saw strong engagement across our ops.

Mark Elliot Zuckerberg: A number of exciting new products like threads rebound met of smart glasses, and mixed reality and quest three.

Mark Elliot Zuckerberg: And of course established a world class AI effort, that's going to be the foundation for many of our future products.

Speaker Change: I think that being a leaner company is helping us execute better and faster and we will continue to carry these values forward.

Speaker Change: A permanent part of how we operate.

Mark Elliot Zuckerberg: Now, moving forward, a major goal will be building the most popular and most advanced AI products and services. And if we succeed, everyone who uses our services will have a world-class AI assistant to help get things done. Every creator will have an AI that their community can engage with. Every business will have an AI that their customers can interact with to buy goods and get support. And every developer will have a state-of-the-art open-source platform to build with.

Now moving forward a major goal will be building the most popular and most advanced AI products and services.

Speaker Change: And if we succeed everyone who uses our services will have a world class AI assistant to help get things done every creator will have an AI that theyre community can engage with every business will have an AI that their customers can interact with to buy goods and get support and every developer will have a state of the art open source model to build with.

Mark Elliot Zuckerberg: I also think that everyone will want a new category of computing devices that let you frictionlessly interact with AIs, that can see what you see and hear what you hear, like smart... And one thing that has become clearer to me in the last year is that this next generation of services requires building full general intelligence. Previously, I thought that because many of the tools were social, commerce, or maybe media-oriented, it might be possible to deliver these products by solving only a subset of AI's challenges. But now it's clear that we're going to need our models to be able to reason, plan, code, remember, and many other cognitive abilities in order to provide the best versions of the services that we imagine.

Speaker Change: I also think that everyone will want a new category of computing devices that let you frictionlessly interact with eyes that can see what you see and hear what you hear is like smart glasses.

And one thing that became clear to me in the last year is that this next generation of services requires building full general intelligence.

Speaker Change: Previously I thought that because many of the tools, where social commerce or maybe media oriented.

Speaker Change: It might be possible to deliver these products by solving only a subset of aig's challenges, but now it's clear that we're going to need our models to be able to reason plan code remember.

Speaker Change: And many other cognitive abilities in order to provide the best versions of the services that we envision.

Mark Elliot Zuckerberg: We've been working on general intelligence research in FAIR for more than a decade, but now general intelligence will be the theme of our product work as well. META has a long history of building new technologies into our services, and we have a clear long-term playbook for becoming leaders. And there are a few key aspects of this that I want to take some time to go through today. The first is world-class compute infrastructure. I recently shared that by the end of this year, we'll have about 350,000 H100s, and including other GPUs, that'll be around 600,000 H100 equivalents of compute.

We've been working on General Intelligence research and fair for more than a decade, but now general intelligence will be the theme of our product work as well.

Meta has a long history of building new technologies into our services and we have a clear long term playbook for becoming leaders and there are few key aspects of this that I want to take some time to go through today.

Speaker Change: The first is world class compute infrastructure.

Speaker Change: I recently shared that by the end of this year, we will have about 350008, hundreds and including other gpus that'll be around 600000, each 100 equivalents of compute.

Mark Elliot Zuckerberg: We're well positioned now because of the lessons that we learned from Reals. We initially underbuilt our GPU clusters for Reals, and when we were going through that, I decided that we should build enough capacity to support both Reals and another Reals-sized AI service that we expected to emerge so we wouldn't be in that situation again. And at the time, the decision was somewhat controversial, and we faced a lot of questions about CapEx spending, but I'm really glad that we did it. Now, going forward, we think that training and operating future models will be even more compute intensive. We don't have a clear expectation for exactly how much this will be yet, but the trend has been that state-of-the-art large language models have been trained on roughly 10x the amount of compute each year. Our training clusters are only part of our overall infrastructure, and the rest, obviously, isn't growing as quickly.

Speaker Change: We're well positioned now because of the lessons that we've learned from Reals. We initially under built our GPU clusters for Reals.

Speaker Change: And when we were going through that I decided that we should build enough capacity to support both reals and another real sized AI service that we expected to emerge. So we wouldn't be in that situation again and at the time. The decision was somewhat controversial and we faced a lot of questions about capex spending, but I'm really glad that we did this.

Speaker Change: Now going forward.

Speaker Change: We think that training and operating future models will be even more compute intensive.

Speaker Change: Don't have a clear expectation for for exactly how much this will be yet, but the trend has been that state of the art large language models have been trained on roughly <unk> the amount of compute.

Speaker Change: Each year and.

Speaker Change: Our training clusters are only part of our overall infrastructure and the rest obviously isn't growing as quickly.

Mark Elliot Zuckerberg: But overall, we're playing to win here, and I expect us to continue investing aggressively in this area. In order to build the most advanced clusters, we're also designing novel data centers and designing our own custom silicon specialized for our workloads. The second part of our playbook is open-source software infrastructure. Our long-standing strategy has been to build an open-source general infrastructure while keeping our specific product implementations proprietary.

Speaker Change: But overall, we're playing to win here and I expect us to continue investing aggressively in this area.

Speaker Change: In order to build the most advanced clusters. We're also designing novel Datacenters in designing our own custom silicon specialized for workloads.

Speaker Change: The second part of our playbook is open source software infrastructure.

Speaker Change: Our long standing strategy has been to build an open source general infrastructure, while keeping our specific proud product implementations proprietary in the case of AI. The general infrastructure includes our llama models, including Lama III, which is trending now and it's looking great. So far.

Mark Elliot Zuckerberg: In the case of AI, the general infrastructure includes our LLAMA models, including LLAMA3, which is training now and is looking great so far, as well as industry-standard tools like PyTorch that we've developed. And you know this approach to open source has unlocked a lot of innovation across the industry, and it's something that we believe in deeply. I know that some people have questions about how we benefit from open sourcing the results of our research and large amounts of computation, so I thought it might be useful to lay out the strategic benefits here. The short version is that open sourcing improves our models, and because there's still significant work to turn our models into products, because there will be other open source models available anyway, we find that there are mostly advantages to being the open source leader, and it doesn't remove differentiation for our products much anyway. Now, more specifically, there are several strategic benefits. First, open source software is typically safer and more secure, as well as more compute efficient to operate due to all the ongoing feedback, scrutiny, and development from the community.

Speaker Change: As well as industry standard tools like pie towards that we've developed.

Speaker Change: And this approach to open sources unlocked a lot of innovation across the industry and it's something that we believe in deeply.

Speaker Change: I know that some people have questions about how we benefit from open sourcing the results of our research and large amounts of compute so I thought it might be useful to lay out the strategic benefits here.

Speaker Change: The short version is that open sourcing improves our models and because there is still significant work to turn our models into products.

Speaker Change: There will be other open source models available anyway, we find that they're mostly advantages to being the open source leader and it doesn't remove differentiation for our products much anyway now more specifically there are several strategic benefits first open source software is typically safer and more secure as well as more compute efficient to operate due to.

Speaker Change: All of the ongoing feedback scrutiny in development from the community.

Mark Elliot Zuckerberg: Now, this is a big deal because safety is one of the most important issues in AI. Efficiency improvements and lowering compute costs will also benefit everyone, including us. Second, open source software often becomes an industry standard, and when companies standardize on building with our stack, it then becomes easier to integrate new innovations into our. That's subtle, but the ability to learn and improve quickly is a huge advantage, and being an industry standard enables that.

Speaker Change: Now this is a big deal because safety is one of the most important issues in AI efficiency.

Efficiency improvements and lowering the compute costs also benefit everyone, including us.

Speaker Change: And open source software often becomes an industry standard and when companies standardize on building with our stock.

Speaker Change: That then becomes easier to integrate new innovations into our products that subtle, but the ability to learn and improve quickly is a huge advantage in and being an industry standard enables that.

Mark Elliot Zuckerberg: Third, open source is hugely popular with developers and researchers, and we know that people want to work on open systems that will be widely adopted, so this helps us recruit the best people at META, which is a very big deal for leading in any new technology area. And again, we typically have unique data and build unique product integrations anyway, so providing infrastructure like LLAMA as open source doesn't reduce our main advantage. This is why our longstanding strategy has been to open source general infrastructure and why I expect it to continue to be the right approach for us going forward. The next part of our playbook is just taking a long-term approach to development. And while we're working on today's products and models, we're also working on the research that we need to advance for LLAMA 5, 6, and 7 in the coming years and beyond to develop full general intelligence. It's important to have a portfolio of multi-year investments and research projects, but it's also important to have clear launch vehicles like future LLAMA models that help focus our work. We've worked on general intelligence in our lab fair for more than a decade, as I mentioned, and we've produced a lot of valuable work.

Speaker Change: Third open sources hugely popular with developers and researchers and we know that people want to work on open systems that will be widely adopted so this helps us recruit the best people at Nevada, which is a very big deal for leading in any new technology area.

Speaker Change: And again, we typically have unique data and build unique product integrations anyway, so providing infrastructure like Lama as open source doesn't reduce our main advantages.

This is why our longstanding strategy has been to open source general infrastructure and why I expect it to continue to be the right approach for us going forward.

Speaker Change: The next part of our playbook is just taking a long term approach towards development.

Speaker Change: Well, we're working on today's products and models. We're also working on the research that we need to advance for Lama five six and seven in the coming years.

Speaker Change: And beyond to develop full general intelligence.

Speaker Change: It is important to have a portfolio of multi year investments in research projects, but.

Speaker Change: It's also important to have clear launch vehicles like future Lama models that help focus our work and we've worked on general intelligence in our lab, a fair for more than a decade as I mentioned and we produced a lot of valuable work, but having clear product targets for for delivering general intelligence really focuses this work and helps us build the leading research.

Mark Elliot Zuckerberg: But having clear product targets for delivering general intelligence really focuses this work and helps us build a leading research program. Now, the next key part of our playbook is learning from unique data and feedback, and our products. When people think about data, they typically think about the dataset that you might use to train a model up front.

Speaker Change: Graham.

Speaker Change: Now the next key part of our playbook is learning from unique data and feedback loops.

And our products.

Speaker Change: When people think about data and then they typically think about the corpus that you might use to train a model upfront and on.

Mark Elliot Zuckerberg: On Facebook and Instagram, there are hundreds of billions of publicly shared images and tens of billions of public videos, which we estimate is greater than the common crawl data, and people share large numbers of public text posts and comments across our services as well. But even more important than the upfront training corpus is the ability to establish the right feedback loops with hundreds of millions of people interacting with AI services across our products. And this feedback is a big part of how we've improved our AI systems so quickly with reels and ads, especially over the last couple of years when we had to re-architect them around new rules. Now that brings me to the last part of our playbook for building leading services, which is our culture of rapid learning and experimentation across our apps.

Speaker Change: On Facebook and Instagram there are hundreds of billions of publicly shared images and tens of billions of public videos, which we estimate is greater than the common crawl dataset and people share large numbers of public text posts and comments across our services as well.

Speaker Change: But even more importantly upfront training corpus is the ability to establish the right feedback loops with hundreds of millions of people interacting with AI services across our products.

Speaker Change: And this feedback.

Speaker Change: It is a big part of how we've improved our AI systems, so quickly with Reals and ads.

Speaker Change: Especially over the last couple of years, when we had to re architected around new rules.

Speaker Change: Now that brings me to the last part of our playbook for building, leading services, which is our culture of rapid learning and experimentation across our apps.

Mark Elliot Zuckerberg: When we decide that a new technology like AI-recommended reels is going to be an important part of the future, we're not shy about having multiple teams experimenting with different versions across our apps until we get it right. And then we learn what works, and we roll it out. There used to be this meme that we'd probably launch stories on our settings page at some point. And look, I think it's kind of funny because it gets to a core part of our approach.

Speaker Change: When we decide that a new technology like AI recommended reals is it going to be an important part of the future.

Speaker Change: We're not shy about having multiple team is experimenting with different versions across our apps until we get it right and then we learned what works and we roll it out to everyone.

Speaker Change: There used to be this meme.

Speaker Change: We'd probably launched stories on our settings page at some point in time and look I think it's kind of funny because it gets to a core part of our approach.

Mark Elliot Zuckerberg: We start by learning and tuning our products until they perform the way we want, and then we roll them out very broadly. And sometimes, you know, occasionally, products will blow up before we're ready for them to, like Threads, although I'll note that Threads now has more actively using it today than it did during its initial launch peak. So that one's, I think, on track to be a major success. But normally, we learn, and we iterate methodically.

Speaker Change: We start by learning and tuning our products until they perform the way we want and then we roll them out very broadly and sometimes you know occasionally products will will blow up before we're ready for them to like threads. Although I'll note that threads now has more people actively using it today than it did during its initial launch peak so that ones I think.

Speaker Change: On track to be a major success.

Speaker Change: But normally we learn and we iterate methodically and we started doing that with our AI services in the fall launching that AI our assistant.

Mark Elliot Zuckerberg: And we started doing that with our AI services in the fall, launching that AI, our assistant, AI Studio, which is the precursor to creator AIs, our alpha with business AIs, and the Ray-Ban META Smart Glasses. And we've been tuning each of these, and we're getting closer to rolling them out more widely. So you should expect that in the coming months.

Speaker Change: AI studio, which is the precursor to create array eyes.

Speaker Change: Our alpha business. He is in the rebound met of smart glasses.

Speaker Change: And we've been tuning each of these and we're getting closer to rolling them out.

Speaker Change: More widely so you should expect that in the coming months.

Mark Elliot Zuckerberg: From there, we'll focus on rolling out services until they reach hundreds of millions or billions of people. And usually, only when we reach that kind of scale do we start focusing on what monetization will look like. And although in this case, you know, the way that business AIs will help business messaging grow on WhatsApp, Messenger, and Instagram is pretty clear. But that's our basic approach, and I'm really excited about pointing our company at developing so many of these awesome things. Now, we have two major parts of our long-term vision, and in addition to AI, the other part is the metaverse.

Speaker Change: From there.

Speaker Change: We'll focus on rolling out services until they reach hundreds of millions or billions of people and usually only when we reach that kind of scale do we start focusing on what monetization will look like.

Speaker Change: And although in this case the way the business AI is what will help the business messaging grow in Whatsapp messenger and Instagram is pretty clear.

Speaker Change: But that's our basic approach and I'm really excited about pointing our company at developing so many of these awesome things.

Speaker Change: Now we have two major parts of our long term vision and in addition to AI. The other part is the meta versus.

Mark Elliot Zuckerberg: We've invested heavily in both AI and the metaverse for a long time, and we will continue to do so. These days, there are a lot of questions more about AI that I get, and that field is moving very quickly. But I still expect this next generation of AR, VR, and MR computing platforms to deliver a realistic sense of presence that will be the foundation for the future of social experiences, and almost every other category of experiences as well. Reality Labs crossed a billion dollars in revenue in Q4 for the first time, with Quest having a strong holiday season. Quest 3 is off to a strong start, and I expect it to continue to be the most popular mixed reality device. With Quest 3 and Quest 2 both performing well, we saw that the Quest app was actually the most downloaded app in the App Store on Christmas Day.

We've invested heavily in both AI and the meta versus for a long time, and we will continue to do so and these days there are lot of questions more about AI that I get in that field is moving very quickly, but but I still expect that this next generation of <unk>.

Speaker Change: VR and AR computing platforms to deliver a realistic sense of presence that will be the foundation for the future of social experiences.

Speaker Change: And almost every other category of experiences as well.

Speaker Change: Our reality labs crossed $1 billion in revenue in Q4 for the first time now with.

Speaker Change: Quest, having a strong holiday season quest three is off to a strong start.

Speaker Change: And I expect it to continue to be the most popular mixed reality device.

With quest, three and quest to both performing well.

Speaker Change: We started the quest App was actually the most downloaded app in the App store on Christmas day.

Mark Elliot Zuckerberg: I want to give a shout out to Asgard's Wrath 2, which was developed by one of our in-house studios and received IGN's 10 out of 10 masterpiece rating, making it one of the best rated games out there, not just in VR, but of any game on any platform ever. It's a really good sign that we're able to deliver that quality of work at META. Horizon is growing quickly too. It is now in the top 10 most used apps on Quest, and we have an exciting roadmap ahead. This is another example of applying the long-term playbook that I discussed earlier with AI in another area.

Speaker Change: I want to give a shout out to <unk> <unk>, two which was developed by one of our in House Studios and received IGN 10 out of 10 masterpiece rating, making it one of the best rated games out there not just in VR, but of any game on any platform ever.

Speaker Change: It's a really good sign that we're able to deliver that quality of work at meta.

Speaker Change: Horizon has grown quickly to it is now in the top 10, most used apps on quest and we have an exciting roadmap ahead.

Speaker Change: This is another example of applying the long term playbook that I discussed earlier with AI, but in another area.

Mark Elliot Zuckerberg: We take the time to build up the core technology and tune the experience, and then when it's ready, we're good at growing. Now, our focus for this year is going to be on growing the mobile version of Horizon as well as the VR one. Ray-Ban META Smart Glasses are also off to a very strong start, both in sales and engagement. Our partner, Essilor Luxottica, is already planning on making more than we'd both expected due to high demand. Engagement and retention are also significantly higher than the first version of the glasses. The experience is just a lot better with META AI in there, as well as there being a higher resolution camera, better audio, and more.

Speaker Change: We take the time to build up the core technology and tune the experience and then when it's ready.

Speaker Change: Where could it growing things now.

Speaker Change: Our focus for this year is gonna be on growing the mobile version of horizon as well as the AR VR one.

Speaker Change: Ray ban met a smart glasses are also off to a very strong start both in sales and engagement.

Speaker Change: Partner Essilor Luxottica.

Speaker Change: Is there any planning on making more than we'd both expected due to high demand <unk>.

Speaker Change: Engagement and retention are also significantly higher than the first version of the glasses.

Speaker Change: Experience is just a lot better with meta AI in there as well as there's a high risk high resolution camera better audio.

Speaker Change: And more and we also have an exciting roadmap of software improvements ahead, starting with rolling out multimodal AI and then some other really exciting new AI features later in the year.

Mark Elliot Zuckerberg: And we also have an exciting roadmap of software improvements ahead, starting with rolling out multimodal AI, and then some other really exciting new AI features later in the year. I said this before, but I think that people are going to want new categories of devices that let them functionlessly engage with AIs frequently throughout the day without having to take out their phone and press a button and point it at what they want to see. And I think that smart glasses are going to be a compelling form factor for this, and it's a good example of how our AI and metaverse visions are connected.

Said this before but I think that people are going to want new categories of devices like shamelessly engage with AI is frequently throughout the day without having to take out your phone and press the button.

Speaker Change: And pointed it what you want to see and I think thats smart glasses are going to be a compelling form factor for this and it's a good example of how our AI and meta vision Metaverse visions are connected and.

Mark Elliot Zuckerberg: In addition to AI and the Metaverse, we're continuing to improve our apps and ads businesses as well. Reels and our discovery engine remain a priority and a major driver of engagement, and messaging continues to be our focus for building the next revenue pillar of our business before our longer-term work reaches scale. But since I went a bit longer on the other areas today, I'm just going to mention a few highlights here. Reels continues to do very well on both Instagram and Facebook. People reshare Reels 3.5 billion times every day.

Speaker Change: In addition to AI in the meta versus how we're continuing to improve our apps and adds businesses as well.

Speaker Change: Reels and our discovery engine remain a priority in major driver of engagement and messaging continues to be our focus for building. The next revenue pillar of our business before our longer term work reaches scale.

But since I went a bit longer than the other areas today I'm just can I mentioned a few highlights here.

Speaker Change: <unk> continues to do very well across both Instagram and Facebook people re share Reals $3 5 billion times every day.

Mark Elliot Zuckerberg: Reels is now contributing to our net revenue across our apps. The biggest opportunity going forward is unifying our recommendation systems across Reels and other types of video that will help people discover the best content across our systems no matter what format it's in. WhatsApp is also doing very well, and the most exciting new trend here is that it is succeeding more broadly in the United States, where there is a real appetite for a private, secure, and cross-platform messaging app that everyone can use.

Speaker Change: <unk> is now contributing to our net revenue across our apps the biggest opportunity going forward as a unifying our recommendation systems across the <unk> and other types of video that will help people discover the best content across our system is no matter what format. It's in.

Speaker Change: Whatsapp is also doing very well and the most exciting new trend here is that it is succeeding more broadly in the United States, where there's a real appetite for a private secure and cross platform messaging app that everyone can use and given the strategic importance of the U S and it's outsized importance for revenue.

Mark Elliot Zuckerberg: And given the strategic importance of the U.S. and its outsized importance for revenue, this is just a huge opportunity. Threads is also growing steadily with more than 130 million monthly active users, and I'm optimistic that we can keep the pace of improvements and growth going and show that a friendly, discussion-oriented app can be as widely used as the most popular social app. All right, that's what I wanted to cover today.

Speaker Change: This is just a huge opportunity.

Speaker Change: Threads is also growing steadily with more than 130 million monthly actives.

And I'm optimistic that we can keep the pace of improvements in gross going and show that a friendly discussion oriented app can be as widely used as the most popular social apps.

Speaker Change: Alright, that's what I wanted to cover today, our communities are growing and our business is back on track.

Mark Elliot Zuckerberg: Our communities are growing, and our business is back on track. Once again, a big thank you to all of our employees, partners, shareholders, and everyone in our community for sticking with us and for making 2023 such a success. I'm looking forward to another exciting year ahead. And now, Susan.

Speaker Change: Once again, a big thank you to all of our employees partners shareholders and everyone in our community for sticking with us and for making 2023.

Speaker Change: A success I am looking forward to another exciting year ahead and now here's Susan.

Susan D. Desmond: Thanks, Mark, and good afternoon, everyone. Let's begin with our consolidated results. All comparisons are on a year-over-year basis unless otherwise noted.

Susan Li: Thanks, Mark and good afternoon, everyone.

Susan Li: Let's begin with our consolidated results.

Susan Li: All comparisons are on a year over year basis, unless otherwise noted.

Susan D. Desmond: Q4 total revenue was $40.1 billion, up 25% or 22% on a constant currency basis. HQ4 total expenses were $23.7 billion, down 8% compared to last year. In terms of the specific line items, cost of revenue decreased 8%, driven mainly by lower restructuring costs that were partially offset by higher infrastructure-related costs. R&D increased 8%, driven primarily by higher headcount-related costs from Family of Apps and Reality Labs, as well as higher non-headcount-related Reality Labs operating expenses, which were partially offset by lower restructuring costs. Marketing and sales decreased 29%, due mainly to lower marketing spend and restructuring costs.

Susan Li: Q4, total revenue was $41 billion up 25% or 22% on a constant currency basis.

Susan Li: Q4, total expenses were $23 7 billion down 8% compared to last year.

Susan Li: In terms of the specific line items.

Susan Li: Cost of revenue decreased 8% driven mainly by lower restructuring costs that were partially offset by higher infrastructure related costs.

Susan Li: R&D increased 8% driven primarily by higher head count related costs from family of apps and reality labs as well as higher non head count related reality labs operating expenses, which were partially offset by lower restructuring costs.

Marketing and sales decreased 29% due mainly to lower marketing spend and restructuring costs.

Susan D. Desmond: GNA decreased 26% due mainly to lower restructuring expenses. We ended the fourth quarter with over 67,300 employees, down 22% from a year ago, while up 2% from Q3 as our hiring efforts have resumed. Fourth Quarter Operating Income was $16.4 billion, representing a 41% operating margin. Our tax rate for the quarter was 17 percent.

Susan Li: G&A decreased 26% due mainly to lower restructuring expenses.

Susan Li: We ended the fourth quarter with over 67300 employees down 22% from a year ago, while up 2% from Q3 as our hiring efforts have resumed.

Susan Li: Fourth quarter operating income was $16 $4 billion.

Susan Li: <unk>, a 41% operating margin.

Susan Li: Our tax rate for the quarter was 17%.

Susan D. Desmond: Net income was $14 billion, or $5.33 per share. Capital expenditures, including principal payments on finance leases, were $7.9 billion, driven by investments in servers, data centers, and network infrastructure. Free cash flow was $11.5 billion, which reflects a $1.6 billion payment of income taxes deferred from prior quarters of 2023.

Susan Li: Net income was $14 billion or $5 33 per share.

Susan Li: Capital expenditures, including principal payments on finance leases were seven 9 billion driven by investments in servers data centers and network infrastructure.

Susan Li: Free cash flow was 11 5 billion, which reflects a $1 6 billion dollar payment of income taxes deferred from prior quarters of 2023.

Susan D. Desmond: We ended the year with $65.4 billion in cash and marketable securities and $18.4 billion in debt. In the fourth quarter, we repurchased $6.3 billion of our Class A common stock, bringing our total share of purchases for the full year to $20 billion. We had $30.9 billion remaining on our prior authorization as of December 31, and today we announced a $50 billion increase in our stock repurchase authorization. Moving now to our segment results. I'll begin with our family of apps segment. In Q4, we saw continued community growth across our family of apps, as well as Facebook specifically. We're sharing today that, as promised when we first introduced our family metrics, we are transitioning away from reporting Facebook-specific metrics. As part of this transition, we will no longer report Facebook daily and monthly active users or family monthly active people.

Susan Li: We ended the year with $65 $4 billion in cash and marketable securities and $18 $4 billion in debt.

Susan Li: In the fourth quarter, we repurchased $6 3 billion of our class a common stock, bringing our total share repurchases for the full year to $20 billion, we had $39 billion remaining on our prior authorization as of December 31, and today, we announced a $50 billion increase.

Susan Li: And our stock repurchase authorization.

Susan Li: Moving now to our segment results.

Susan Li: I'll begin with our family of apps segment.

Susan Li: In Q4, we saw continued community growth across the family of apps as well as Facebook specifically.

Susan Li: We're sharing today that as previewed when we first introduced our family metrics, we are transitioning away from reporting Facebook specific metrics.

Susan Li: As part of this transition we will no longer report Facebook daily and monthly active users or family monthly active people in.

Susan D. Desmond: In Q1, we will instead begin reporting year-over-year changes in ad impressions and the average price per ad at the regional level, while continuing to report family daily active users. For full year 2023, Family of Apps' total revenue was $133 billion, and ad revenue was $131.9 billion, each up 16% year-over-year. The largest contributors to year-over-year ad revenue growth were the online commerce The online commerce and gaming verticals benefited from strong demand from advertisers in China reaching people in other markets. In 2023, revenue from China-based advertisers represented 10 percent of our overall revenue and contributed five percentage points to total worldwide revenue growth. Turning back to the Q4 results.

Susan Li: In Q1, we will instead begin reporting year over year changes in AD impressions and the average price per AD at the regional level, while continuing to report family daily active people.

Susan Li: For full year 2023 family of apps total revenue was $133 billion in AD revenue was $131 $9 billion, each up 16% year over year.

Susan Li: The largest contributors to year over year AD revenue growth, where the online commerce, CPG entertainment and media and gaming verticals.

Susan Li: The online commerce and gaming verticals benefited from strong demand by advertisers in China, reaching people in other markets in.

Susan Li: In 2023 revenue from China based advertisers represented 10% of our overall revenue and contributed five percentage points to total worldwide revenue growth.

Susan Li: Turning back to Q4 results.

Susan D. Desmond: Q4 total family of apps revenue was $39 billion, up 24% year over year. Q4 Family of Apps ad revenue was $38.7 billion, up 24% or 21% on a constant currency basis. Within ad revenue, the online commerce vertical was the largest contributor to year-over-year growth, followed by CPG and gaming. On a user geography basis, ad revenue growth was strongest in Europe and the rest of the world at 33% and 32%, respectively, followed by Asia-Pacific at 23% and North America at 19%. Foreign currency was a tailwind to advertising revenue growth in all international regions. In Q4, the total number of ad impressions served across our services increased 21%, and the average price per ad increased 2%. Impression growth was mainly driven by Asia-Pacific and the rest of the world.

Susan Li: Q4 total family of apps revenue was $39 billion up 24% year over year.

Susan Li: Q4 family of apps AD revenue was $38 7 billion up 24% or 21% on a constant currency basis.

Susan Li: Within AD revenue with the online commerce vertical was the largest contributor to year over year growth followed by CPG and gaming.

Susan Li: On a user geography basis AD revenue growth was strongest in Europe, and rest of world at 33% and 32%, respectively, followed by Asia Pacific at 23% and North America at 19%.

Susan Li: Foreign currency was a tailwind to advertising revenue growth in all international regions.

Susan Li: In Q4, the total number of AD impressions served across our services increased 21%.

Susan Li: And the average price per AD increased 2%.

Susan Li: Impression growth was mainly driven by Asia Pacific and rest of world.

Susan D. Desmond: Pricing growth was driven by advertiser demand and currency tailwinds, which were partially offset by strong impression growth, particularly from lower monetizing surfaces and retail. Family of Apps Other Revenue was $334 million in Q4, up 82%, driven by business messaging revenue growth from our WhatsApp business platform. We continue to direct the majority of our investments toward the development and operation of our family of apps. In Q4, our Family of Apps expenses were $18 billion, representing approximately 76% of our overall expenses. Family of Apps expenses were down 13% due to lower restructuring expenses.

<unk> growth was driven by advertiser demand and currency tailwind, which were partially offset by strong impression growth, particularly from lower monetizing surfaces and regions.

Susan Li: Family of apps other revenue was $334 million in Q4 up 82% driven by business messaging revenue growth from our Whatsapp business platform.

Susan Li: We continue to direct the majority of our investments toward the development and operation of our family of apps.

Susan Li: In Q4 family of apps expenses were $18 billion representing.

Susan Li: Approximately 76% of our overall expenses.

Susan Li: Family of apps expenses were down 13% due to lower restructuring expenses.

Susan D. Desmond: Family of Apps operating income was $21 billion, representing a 54% operating margin. Within our Reality Lab segment, Q4 revenue was $1.1 billion, up 47% driven by Quest 3 sales during the holiday season. Reality Lab's expenses were $5.7 billion, up 14% year-over-year, due primarily to higher headcount-related expenses and non-headcount-related R&D. Reality Lab's operating loss was $4.6 billion.

Susan Li: Family of apps operating income was $21 billion, representing a 54% operating margin.

Susan Li: Within our reality lab segment Q4 revenue was $1 $1 billion up 47% driven by quest three sales during the holiday season.

Susan Li: Reality labs expenses were $5 $7 billion up 14% year over year, due primarily to higher head count related expenses and non head count related R&D spend.

Susan Li: Reality labs operating loss was $4 6 billion.

Susan D. Desmond: Turning now to the business outlook, there are two primary factors that drive our revenue performance. Our ability to deliver engaging experiences for our community and our effectiveness at monetizing that engagement over time. On the first front, we remain pleased with engagement trends and have strong momentum across our product priorities. We're seeing sustained growth in reels and video overall, as daily watch time across all video types grew over 25% year-over-year in Q4, driven by ongoing ranking improvements. In-feed recommendations of posts from accounts you're not connected to also continue to drive incremental engagement as we increasingly personalize recommendations, and we expect to deliver further improvements this year on Instagram.

Susan Li: Turning now to the business outlook. There are two primary factors that drive our revenue performance.

Susan Li: Our ability to deliver engaging experiences for our community.

Susan Li: And our effectiveness at monetizing that engagement over time.

Susan Li: On the first we remain pleased with engagement trends and have strong momentum across our product priorities.

Susan Li: We're seeing sustained growth in Reals and video overall as daily watch time across all video types grew over 25% year over year in Q4, driven by ongoing ranking improvements.

Susan Li: In feed recommendations of posts from accounts you are not connected to also continue to drive incremental engagement as we increasingly personalized recommendations and we expect to deliver further improvements this year.

On Instagram.

Susan D. Desmond: We're making strong progress increasing the freshness of recommended content, and a big focus for Facebook this year will be unifying our video experiences and ranking across the app, which should create a more seamless user experience and deliver increasingly relevant video recommendations. On WhatsApp, community growth remains strong, and we're seeing good traction with our Channels product, which has quickly scaled to over 500 million monthly active users since we rolled it out globally in September. We're also making good progress in areas that have the potential to grow people's engagement with our products in the longer term, such as threads and generative AI. OnThreads, we're coming into 2024 with strong product momentum and remain focused on introducing additional valuable features and further scaling the community this year. With Generative AI, we fully rolled out our META AI Assistant and other AI chat experiences in the U.S. at the end of the year and began testing more than 20 Gen AI features across our family of apps.

Susan Li: We're making strong progress increasing the freshness of recommended content and a big focus for Facebook. This year will be unifying our video experiences and ranking across the app, which should create a more seamless user experience and deliver increasingly relevant video recommendations.

Susan Li: On Whatsapp community growth remains strong and we're seeing good traction with our channels product, which has quickly scaled to over 500 million monthly active users since we rolled it out globally in September.

Susan Li: We are also making good progress in areas that have the potential to grow people's engagement with our products and the longer term such as threads and generative AI.

Susan Li: Threads, where coming into 2024 with strong product momentum and remain focused on introducing additional valuable features and further scaling the community this year.

Susan Li: With generative AI, we fully rolled out our meta AI assistant and other AI chat experiences in the U S. At the end of the year and began testing more than 20 Gen. AI features across our family of apps.

Susan D. Desmond: Our big areas of focus in 2024 will be working towards the launch of LLAMA 3, expanding the usefulness of our META AI, and progressing on our AI studio roadmap to make it easier for anyone to create an AI. For the experiences in our apps, we'll follow our typical approach of making them great before we lean into growth and eventually monetization, but this continues to be an exciting area that has the potential to transform how people engage with our services in the years ahead. Now to the second driver of our revenue performance, increasing monetization efficiency. There are two parts to this.

Susan Li: Our big areas of focus in 2024 will be working towards the launch of Lama three expanding the usefulness of our meta AI assistant and progressing on our AI studio roadmap to make it easier for anyone to create NII.

Susan Li: For the experiences in our apps will follow our typical approach of making them great before we lean into growth and eventually monetization.

Susan Li: But this continues to be an exciting area that has the potential to transform how people engage on our services in the years ahead.

Susan Li: Now to the second driver of our revenue performance, increasing monetization efficiency. There are two parts to this work.

Susan D. Desmond: The first part is growing the level of ad inventory within organic engagement. Our approach to optimizing ad levels in our apps has become increasingly sophisticated over the years as we've developed a better understanding of the optimal place, time, and person to show an ad, which has enabled us to adopt a more dynamic approach to serving ads. We expect to continue that work going forward, while surfaces with relatively lower levels of monetization, like video and messaging, will serve as additional growth opportunities. The other part to increasing monetization efficiency is improving marketing performance. To do this, we're focused on three areas. The first is AI.

Susan Li: The first part is growing the level of AD inventory within organic engagement.

Susan Li: Our approach to optimizing AD levels in our apps has become increasingly sophisticated over the years as we've developed a better understanding of the optimal place time in person to show an ad.

Susan Li: Which has enabled us to adopt a more dynamic approach to serving ads.

Susan Li: We expect to continue that work going forward, while surfaces with relatively lower levels of monetization.

Like video and messaging will serve as additional growth opportunities.

Susan Li: The other part to increasing monetization efficiency is improving marketing performance to do this were focused on three areas. The.

Susan Li: The first is AI, we continue to leverage AI across our AD systems and product suite. We're.

Susan D. Desmond: We continue to leverage AI across our ad systems and products. We're delivering continued performance gains from ranking improvements as we adopt larger and more advanced models, and this will remain an ongoing area of investment in 2024. We're also building out our Advantage Plus portfolio of solutions to help advertisers leverage AI to automate their advertising campaigns. Advertisers can choose to automate part of the campaign creation setup process, such as who to show their ad to, with Advantage Plus Audience, or they can automate their campaign completely.

Susan Li: We're delivering continued performance gains from ranking improvements as we adopt larger and more advanced models and this will remain an ongoing area of investment in 2024.

Susan Li: We're also building out our advantage plus portfolio of solutions to help advertisers leverage AI to automate their advertising campaigns.

Susan Li: Advertisers can choose to automate part of the campaign creation setup process, such as who to show their add too with advantaged plus audience.

Susan Li: Or they can automate their campaign completely use.

Susan Li: Yes.

Susan D. Desmond: Samples, Advantage Plus Shopping, which continues to see strong growth. We're also now exploring ways to apply this end-to-end automation to new objectives. On the ads creative side, we completed the global rollout of two of our generative AI features in Q4, text variations and image expansion, and plan to broaden availability of our background generation feature later in Q1. Initial adoption of these features has been strong, and tests are showing promising early performance gains.

Susan Li: Ingalls advantaged, plus shopping which continues to see strong growth.

We're also now exploring ways to apply this end to end automation to new objectives.

Susan Li: On the ads creative side, we completed the global rollout of two of our generative AI features in Q4 text variations and image expansion and plan to broaden the availability of our background generation feature later in Q1.

Susan Li: Initial adoption of these features has been strong and tests are showing promising early performance gains.

Susan D. Desmond: This will remain a big area of focus for us in 2024. The second area of our work is helping businesses connect their marketing data and measure results. Here, we're continuing to invest in the Conversions API to make it easier for advertisers to not only adopt but maximize its impact. The last area is investing in new and engaging on-platform ad experiences. Business messaging remains a priority.

Susan Li: This will remain a big area of focus for us in 2024.

Susan Li: The second area of our work is helping businesses connect to their marketing data and measure results here, we're continuing to invest in conversions API to make it easier for advertisers to not only adopt but maximize its impact.

The last area is investing a new and engaging on platform ad experiences.

Susan Li: Business messaging remains a priority here click to messenger ads continue to grow and we're seeing advertisers increasingly use these ads to drive down funnel conversions.

Susan D. Desmond: Click-to-message ads continue to grow, and we're seeing advertisers increasingly use these ads to drive down-funnel conversion. Paid messaging is growing quickly, and we are focused on broadening adoption in 2024 by making it easier for businesses to buy marketing messages and more easily adopt our flows product to develop richer in-thread experiences for consumers. We're also progressing with our early testing on WhatsApp and Messenger of AIs for businesses that can provide conversational support and chat. We'll take our time to get these experiences right, but we think this will be a compelling opportunity that we're well positioned to deliver on. Outside of business messaging, we're making strong progress with our Shops Ads products, which crossed a $2 billion annual run rate in Q4. Next, I would like to discuss our approach to capital allocation.

Susan Li: Paid messaging is growing quickly and we are focused on broadening adoption in 2024 by making it easier for businesses to buy marketing messages and more easily adopt our flows product to develop richer in threat experiences for consumers.

Susan Li: We're also progressing with our early testing on Whatsapp and messenger of AI for businesses that can provide conversational support and chat.

Susan Li: We will take our time to get these experiences right, but we think this will be a compelling opportunity that we're well positioned to deliver on.

Susan Li: Outside of business messaging, we're making strong progress with our shops ads products, which crossed the $2 billion of annual run rate in Q4.

Speaker Change: Next I would like to discuss our approach to capital allocation.

Susan D. Desmond: We are in the fortunate position of being able to invest in many organic opportunities to improve the performance of our core business in the near term while also making two significant longer-term horizon investments in AI and reality labs. AI will be a growing area of investment for us in 2024 as we hire to support our roadmaps. We are also investing more in our AI infrastructure capacity this year, and given many of our ambitious forward-looking plans will rely on having sufficient compute capacity, we expect this to be an area we invest more aggressively in over the coming years. Reality Labs is the other long-term initiative we continue to invest heavily in as we progress in our efforts to develop the next computing platform.

Speaker Change: We are in the fortunate position of being able to invest in many organic opportunities to improve the performance of our core business in the near term, while also making two significant longer time horizon investments in AI and reality labs.

AI is a growing area of investment for us in 2024, as we hire to support our roadmap.

Speaker Change: We are also investing more in our AI infrastructure capacity this year and given many of our ambitious forward looking plans will rely on having sufficient compute capacity. We expect this to be an area, we invest more aggressively in over the coming years.

Speaker Change: Reality labs is the other long term initiatives, we continue to invest heavily in as we progress on our efforts to develop the next computing platform.

Susan D. Desmond: Aside from organic investments, returning capital to shareholders remains important to us. We believe our strong financial position and performance will enable us to invest in the business while also continuing to return capital to investors over time. We've historically done so through share repurchases, and while we expect to maintain an active share repurchase program, we are modestly evolving our approach going forward by returning a portion of capital through a regular dividend subject to quarterly board approval. In addition, we continue to monitor the active regulatory landscape, including the increasing legal and regulatory headwinds in the EU and the U.S. that could significantly impact our business and our financial results. Of note, the FTC is seeking to substantially modify our existing consent order and impose additional restrictions on our ability to operate.

Speaker Change: Aside from organic investments returning capital to shareholders remains important to us we believe our strong financial position and performance will enable us to invest in the business. While also continuing to return capital to investors over time.

Speaker Change: We've historically done so through share repurchases and while we expect to maintain an active share repurchase program. We are modestly evolving our approach going forward by returning a portion of capital through our regular dividend subject to quarterly board approval.

Speaker Change: In addition, we continue to monitor the active regulatory landscape, including the increasing legal and regulatory headwinds in the EU and the U S that could significantly impact our business and our financial results.

Speaker Change: Of note the FTC is seeking to substantially modify our existing consent order and impose additional restrictions on our ability to operate.

Susan D. Desmond: We are contesting this matter, but if we are unsuccessful, it would have an adverse impact on our business. Turning now to The Revenue Outlet. We expect first quarter 2024 total revenue to be in the range of $34.5 to $37 billion. Our guidance assumes foreign currency is neutral to year-over-year total revenue growth based on current exchange rates.

Speaker Change: We are contesting this matter, but if we are unsuccessful. It would have an adverse impact on our business.

Speaker Change: Turning now to the revenue outlook, we expect first quarter 2020 for total revenue to be in the range of $34.5 billion to $37 billion.

Speaker Change: Our guidance assumes foreign currency is neutral to year over year total revenue growth based on current exchange rates.

Susan D. Desmond: Turning now to the Expense Outlook. We expect full-year 2024 total expenses to be in the range of $94 to $99 billion, unchanged from our prior outlays. We continue to expect a few factors to be drivers of total expense growth in 2024. First, we expect higher infrastructure-related costs this year.

Speaker Change: Turning now to the expense outlook.

We expect full year 2024 total expenses to be in the range of $94 billion to $99 billion unchanged from our prior outlook.

Speaker Change: We continue to expect a few factors to be drivers of total expense growth in 2024.

Speaker Change: First we expect higher infrastructure related costs. This year, given our increased capital investments in recent years, we expect depreciation expenses in 2024 to increase by a larger amount than in 2023.

Susan D. Desmond: Given our increased capital investments in recent years, we expect depreciation expenses in 2024 to increase by a larger amount than in 2023. We also expect to incur higher operating costs from running a larger infrastructure footprint. Second, we anticipate growth in payroll expenses as we work down our current hiring underrun and add incremental talent to support priority areas in 2024, which we expect will further shift our workforce composition toward higher-cost technical roles. Finally, for Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in ARVR and our investments to further scale our ecosystem. Turning now to the CapExcel.

Speaker Change: We also expect to incur higher operating costs from running a larger infrastructure footprint.

Speaker Change: Second we anticipate growth in payroll expenses as we work down our current hiring underrun and add incremental talent to support priority areas in 2024.

Speaker Change: We expect will further shift our workforce composition toward higher cost technical roles.

Speaker Change: Finally for reality labs, and we expect operating losses to increase meaningfully year over year due to our ongoing product development efforts and our VR and our investments to further scale our ecosystem.

Speaker Change: Turning now to the Capex outlook we.

Susan D. Desmond: We anticipate our full year 2024 capital expenditures will be in the range of $30 to $37 billion, a $2 billion increase from the high end of our prior range. We expect growth to be driven by investments in servers, including both AI and non-AI hardware, and data centers as we ramp up construction on sites with our previously announced new data center architecture. Our updated outlook reflects our evolving understanding of our AI capacity demands as we anticipate what we may need for the next generations of foundational research and product development. While we are not providing guidance for years beyond 2024, we expect our ambitious long-term AI research and product development efforts will require growing infrastructure investments beyond this year. On to TACS. Absent any changes to U.S. tax law, we expect our full-year 2024 tax rate to be in the mid-teens.

Speaker Change: We anticipate our full year 2020 for capital expenditures will be in the range of $30 billion to $37 billion, a $2 billion increase of the high end of our prior range.

Speaker Change: We expect growth will be driven by investments in servers, including both AI and non AI hardware and data centers as we ramp up construction on sites with our previously announced new data Center architecture.

Speaker Change: Our updated outlook reflects our evolving understanding of our AI capacity demands as we anticipate what we may need for the next generations of foundational research and product development.

Speaker Change: While we are not providing guidance for years beyond 2024, we expect our ambitious long term AI research and product development efforts will require growing infrastructure investments beyond this year.

Speaker Change: On to tax.

Absent any changes to U S tax law, we expect our full year 2024 tax rate to be in the mid teens.

Susan D. Desmond: In closing, this was a pivotal year for our company. We increased our operating discipline, delivered strong execution across our product priorities, and improved advertising performance for the businesses who rely on our services. We will look to build on our priorities in each of those areas in 2024 while advancing our ambitious longer-term efforts in AI and reality learning. With that, Krista, let's open up the call to questions. Thank you. We will now open the line for questions and answers. To ask a question, please press star one on your touchtone.

Speaker Change: In closing this was a pivotal year for our company, we increased our operating discipline delivered strong execution across our product priorities and improved advertising performance for the businesses, who rely on our services.

Speaker Change: We will look to build on our priorities in each of those areas in 2024, while advancing our ambitious longer term efforts in AI and reality labs, but that Christa, let's open up the call for questions.

Christa: Thank you we will now open the line for a question and answer session to ask a question. Please press star one on your Touchtone phone to withdraw your question again Press Star one we do ask that you. Please limit yourself to one question. Please pickup your handset before asking questions.

Operator: To withdraw your question, again, press star one. We do ask that you please limit yourself to one question. Please pick up your handset before asking questions to ensure clarity. If you are streaming today's call, please mute your computer speaker.

Christa: To ensure clarity if you were to remain todays call. Please mute your computer speakers and your first question comes from the line of Brian Nowak from Morgan Stanley. Please go ahead.

Brian Nowak: And your first question comes from the line of Brian Nowak from Morgan Stanley. Please go ahead. Great. Thanks for taking my questions. I have two.

Brian Nowak: Great. Thanks for taking my questions I have two appreciate market color about sort of the learnings and the data feedback loop. Let me ask you one about sort of the advertising business and all of the new machine learning and new Gen. I add tools that you've built and rolled out the last year or so can you just talk about some of the largest areas.

Susan D. Desmond: I appreciate, Mark, the color about sort of the learnings and the data and feedback loop. Let me ask you one about the advertising business and all of the new machine learning and new Gen AI ad tools that you've built and rolled out over the last year or so. Can you just talk about some of the largest areas of improvement your advertisers say are really driving this inflection of advertising? And what are the areas where you still get the most feedback on for further areas of improvement in the ad business that we should think about? And then, Susan, maybe one on the first quarter guide specifically on the acceleration implied. Anything on more color on which surfaces or ad units or regions are sort of giving you confidence in that type of acceleration at this point in the quarter? Thanks. Hi. Thank you, Brian. I can take both of those.

Brian Nowak: Improvement your advertisers say isn't really driving this inflection of advertising and what are the areas, where you still get the most feedback on for further improvement in the AD business that we should think about and then Susan maybe one on the first quarter guide specifically out of the acceleration implied anything more color on which.

Susan Li: Surfaces are ad units or bjs or sort of giving you confidence in that type of acceleration at this point in the quarter.

Susan Li: Hi.

Susan Li: Thank you, Brian I can take both of those.

Susan D. Desmond: On your first question, you know, what's driving strength in the ads business? We certainly believe that we've been continuing to drive ad performance improvements, and year-over-year conversion growth remains strong, and we see this reflected in the feedback that we hear from advertisers also. There are really three areas of our work here that we're very focused on and have been and will continue to be in 2024. First, just creating engaging on-platform ad experiences. We see that with formats like click-to-message ads, where we continue to see good momentum. Shops ads, you know; we talked about the $2 billion annual run rate in Q4 after we just opened availability to all U.S. advertisers. In Q2, lead generation ads, another example.

Susan Li: On your first question you know what you know.

Susan Li: What is driving strength in the ads business.

Speaker Change: We were we certainly believe that we've been continuing to drive AD performance improvements and year over year conversion growth remains strong and we see this reflected in the feedback that we hear from advertisers also there are really three areas of our work here that we're very focused on and have been and will continue to be in 2024.

Speaker Change: And.

Speaker Change: First just creating engaging on platform AD experiences, we see that with formats like click to messenger ads, where we continue to see good momentum shops adds you know we talked about the $2 billion annual run rate in Q4. After we just opened availability to all U S advertisers.

Speaker Change: In Q2 lead generation adds. Another example, so we're really focused on creating engaging on platform AD experiences second we're really making it easier for advertisers to connect with their marketing data. We're continuing to invest in features like conversions API like a yen and making these features easier too.

Susan D. Desmond: So we're really focused on creating engaging on-platform ad experiences. Second, we're really making it easier for advertisers to connect with their marketing data. We're continuing to invest in features like conversions API, like AEM, and making these features easier to adopt for enhancing reporting and other performance. And, you know, we've seen again that those are, we get very positive feedback from advertisers who use those tools.

Speaker Change: To adopt enhancing reporting and other performance.

Speaker Change: And we've seen again that those are we get a very positive feedback on advertisers who use those tools and then finally continuing to really use AI in important ways across our ads platform. You know for a long time, we have invested in building larger and more advanced models that have resulted in more accurate.

Susan D. Desmond: And then finally, continuing to really use AI in important ways across our ads platform. You know, for a long time, we have invested in building larger and more advanced models that have, you know, resulted in more accurate predictions of relevant ads for people and improved performance for advertisers. And then, of course, we're investing a lot in AI-powered tools and products. So we're really scaling our Advantage Plus suite across. All of the different offerings there, you know, which really help to automate the ads creation process for different types of advertisers. And we're getting very strong feedback on all of those different features. Advantage Plus Shopping, obviously, being the first, but Advantage Plus Catalog, Advantage Plus Creative, Advantage Plus Audiences, etc.

Speaker Change: Predictions of relevant ads for people and improved performance for advertisers and then of course, we're investing a lot in AI powered tools and products. So we're really scaling our advantage plus sweeps across.

Speaker Change: All of the different offerings, there, which which are really help to automate the ads creation process for different types of advertisers.

Speaker Change: And we're getting very strong feedback on all of those different features advantage plus shopping obviously being the first but advantage plus catalog advantage plus creative advantage plus audiences et cetera. So we.

Susan D. Desmond: So we feel, you know, like, these are all really important parts of what has continued to improve in our ads business and, you know, will continue to improve going forward. On your second question, which is about the Q1 year over year, sorry, the Q1 Revenue Guide, you know, this really just reflects a lot of the trends we saw in Q4, which is strong, broad-based advertising demand across verticals, you know, particularly within online commerce and gaming. I'll also note that we get the benefit from having February 29th in this quarter.

Speaker Change: We feel like these are all really important parts of what has continued to grow improvements.

Speaker Change: In in our ads business and we'll continue to going forward on your second question, which is about the Q1 year over year, sorry, the Q1 revenue guide.

Speaker Change: This really just reflects a lot of the trends we saw in Q4, which is strong broad based advertising demand across verticals, you know, particularly within online commerce and gaming.

Speaker Change: I'll also note that we get the benefit from having February 29th in this quarter and again just the improvements.

Susan D. Desmond: And again, just the, you know, improvements that we continue to accrue to the business from all of our investments in improving ad performance over time. Your next question comes from the line of Eric Sheridan from Goldman Sachs. Please go ahead. Thanks so much.

Speaker Change: Improvements that we continue to accrue to the business from all of our investments in improving AD performance overtime.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of Eric Sheridan from Goldman Sachs. Please go ahead.

Eric Sheridan: Maybe two questions if I can. Mark, coming out of a year like you had with the Year of Efficiency, what do you see as the key messages you want to share with investors about what you learned during the Year of Efficiency and how it might inform running an organization with the scale of ambition and just your organizational scale that META has on a long-term basis? That would be number one. And then Susan, I went back and looked.

Eric Sheridan: Thanks, So much maybe two questions if I can mark coming out of a year like you had with the year of efficiency. What do you see as the key messages you want to share with investors about what you learned during the year of efficiency and how it might inform running an organization with the scale of ambition in.

Eric Sheridan: Just your organizational scale that meta has on a long term basis that would be number one and then Susan I went back and looked I don't think you've ever raised the high end of your Capex guidance before unless I'm mistaken, but with a wide range like down in Capex, what should we be monitoring to what would push you towards the lower end.

Mark Elliot Zuckerberg: I don't think you've ever raised the high end of your CapEx guidance before, unless I'm mistaken, but with a wide range like that in CapEx, what should we be monitoring for that would push you towards either the lower end or the higher end of that CapEx guidance as you move through 2024? Thank you.

Eric Sheridan: Or the higher end of that Capex guidance as you move through 2024. Thank you.

Eric Sheridan: Okay.

Speaker Change: I'll take the first one.

Mark Elliot Zuckerberg: So the themes for the Year of Efficiency were to make us a stronger technology company by becoming leaner and more balanced in our engineering work and more streamlined, and to improve our financial performance, primarily with the goal of providing stability so we can invest in these long-term, ambitious platforms. I think, you know, a lot of people... They looked at what we were doing as if it might have been some kind of short-term thing, which, you know, that's never really our focus. Um, But The part about making the company leaner, I think, is the more important part to take forward, right? Because obviously, we're in a place now where the business is performing well, and, And I think the obvious question would be, OK, well, given that, should we just, you know, should we invest a lot more in things?

So the themes for the year of efficiency.

Susan Li: Work to make us a stronger technology company by becoming leaner and more balanced towards our engineering work and more streamlined and to.

Speaker Change: Improve our.

Speaker Change: Financial performance.

Speaker Change: Primarily with the goal of providing stability. So we can invest in these.

Speaker Change: These long term ambitious.

Speaker Change: Visions around AI and meta versus over what we see is.

Speaker Change: The coming decade or more as these things play out.

Speaker Change: And.

Speaker Change: A lot of people.

Speaker Change: Looked at what we were doing as if it might have been some kind of short term thing, which you know that's never really our focus.

Speaker Change:

Speaker Change: But.

Speaker Change: The part about making the company leaner I think is the more important part to take forward right. Because obviously, we're in a place now where the business is performing well and.

Speaker Change: I think the obvious question would be okay, well given that should we just should we invest a lot more and things and the biggest thing that's holding.

Mark Elliot Zuckerberg: And the biggest thing that's holding me back from doing that is that, at this point, I feel like I've really come around to thinking that we operate better as a leaner company. So, you know, even though there are always these questions about, like, adding a few people here or there to do something. And I guess I just have more of an appreciation for how all of that adds up and, in the near term, maybe makes you go a little bit faster.

Speaker Change: <unk> back from doing that is that at this point I feel like I've really come around to thinking that we operate better as a leaner company so even though.

Speaker Change: It's always there's always these questions about like adding a few people here or there to do something and I guess I'd just have more of an appreciation about how all of that adds up and in the near term maybe makes you go a little bit faster, but over the long term the discipline to kind of hold things too to a more streamlined level actually improves the overall company performance, So I'm really folk.

Mark Elliot Zuckerberg: But over the long term, the discipline to kind of hold things to a more streamlined level actually improves the overall company performance, so I'm really focused on that. In 2024, we do have a big recruiting backlog from last year because part of the layoffs that we did included teams basically swapping out certain talent profiles for others.

Speaker Change: Just on that in 2024.

Speaker Change: We do have a big recruiting backlog from last year, because part of the layoffs that we did included teams basically swapping out certain talent profiles for others.

Speaker Change: We still need to hire some of the other talent profiles that we swapped people out for and that will be ongoing through this year, but in terms of new headcount that we added to the plan.

Mark Elliot Zuckerberg: We still need to hire some of the other talent profiles that we swapped people out for, and that will be ongoing through this year, but in terms of new headcount that we added to the plan, it's relatively minimal compared to what we would have done historically, and I sort of expect that for the next period of time going forward, even beyond 2024, my operating assumption is that we will also try to keep it relatively minimal until we reach a point where we' I kind of want to keep things lean because I think that's the right thing for us to do culturally. So that's kind of the best window into how I'm thinking about it.

Speaker Change: It's relatively minimal compared to what we would have done historically and I sort of expect that for the next peer.

Speaker Change: A period of time going forward, even beyond 2020 for my operating assumption is that we will also try to keep it relatively minimal because I think that you know until we reach a point where we're just.

Speaker Change: Really underwater on our ability to execute I kind of want to keep things Liam because I think that's the right thing for us to do culturally.

Speaker Change: So.

Speaker Change: That's kind of the best window into how I'm thinking about this.

Mark Elliot Zuckerberg: The other piece that I guess somewhat dovetails into what Susan is going to talk to you about next is that a big part of why I wanted to improve our profitability is to give ourselves the ability to go through what is a somewhat unpredictable and volatile period over the next five or 10 years. There are different risk factors that are geopolitical or regulatory or different things, but also, the technology landscape is somewhat unknown.

Speaker Change: The other piece that I guess somewhat dovetails into what Susan is going to talk to you next is that.

Speaker Change: A big part of why I wanted to improve our profitability is to give ourselves the ability to go through what is somewhat unpredictable and volatile period over the next five or 10 years there.

Speaker Change: Risk factors that are you know geopolitical or the regulatory or different things, but also the technology landscape is somewhat unknown and we want the ability to be able to surge investment on things like building out larger training clusters or.

Mark Elliot Zuckerberg: And we want the ability to be able to surge investment on things like building out larger training clusters or just making different investments where that's necessary. And in order to make sure that we have the flexibility to do that, we want to make sure that we keep our cost structure to a point where we sort of have some extra space built in. So those are really the two points.

And I was just making different investments, where that's necessary and in order to make sure that we have the flexibility to do that we want to make sure that we keep our cost structure to a point, where we sort of have some some extra space built in so those are really the two points that was the themes that I laid out at the beginning of the year of efficiency last year make us a stronger technology company and give us the flexibility of <unk>.

Susan D. Desmond: That was the theme that I laid out at the beginning of the year of efficiency last year to make us a stronger technology company and give us the flexibility and stability to execute the long-term goals. And those remain, I think, the big focuses going forward.

Speaker Change: The ability to execute our long term goals and those remain I think that is a big focus is going forward on that.

Speaker Change: And I can take the second question, Eric So we.

Susan D. Desmond: So, you know, we're really continuing to evolve our AI roadmaps and ambitions and our understanding of the capacity demands that we might have as we train the next generations of foundation models and to support, you know, all of the associated product development going forward. So the increase in the top end of the range really reflects that evolving understanding of how much demand we may need. And we're also continuing to keep a close eye on supply availability. You know, where we land in that range is a function of both the supply and demand factors I mentioned, and this continues to be a pretty dynamic planning process for us. And there are also certainly other factors that drive uncertainty, you know, how quickly can we execute on the new data center architecture, and how the supply chain turns out to unfold over the course of the year. But our expectation is generally that we will need to invest more to support our AI work in the years ahead. And we're seeing some of that reflected in 2024. Your next question comes from the line of Mark Shmulik from Alliance Bernstein. Please go ahead.

Eric Sheridan: We're really continuing to evolve our AI roadmaps and ambitions and our understanding of the capacity demands that we might have as we train. The next generations of foundation models and to support all of the associated product development going forward.

Eric Sheridan: The increase in the top end of the range really reflects that evolving understanding of how much demand we may need and we're also continuing to keep a close eye on supply availability.

Eric Sheridan: Where we land in that range is a function of both the supply and demand factors I mentioned and this continues to be a pretty dynamic planning process for us and.

Eric Sheridan: And there are also certainly you know other factors that drive uncertainty.

Eric Sheridan: How quickly can we execute on the new data center architecture, how the supply chain turns out to unfold over the course of the year, but our expectation is generally that we will need to invest more to support our AI work in the years ahead, and we're seeing some of that reflected in 2024.

Eric Sheridan: Your next question comes from the line of Mark Shmulik from Alliance Bernstein. Please go ahead.

Mark Mahaney: Yes, thank you for taking my questions. You know, Mark, you mentioned at the top of the call this vision of everyone having a meta AI assistant to kind of get things done. You know, previously, when we were talking about the metaverse, from a time horizon perspective, we were looking at, you know, a decade to kind of get there. But given the pace of innovation around AI that you've seen, has that timeline changed? And like, do you think we'll get there quicker? And then second question for Susan, just quickly on the shop ads, appreciate the color.

Mark Mahaney: Yes, Thank you for taking my questions.

Mark Mahaney: Yes, Mark you mentioned at the top of the call that vision kind of everyone. Having met AI assistant just kind of get things done previously what we were talking about the manto vary from a time horizon perspective, we were looking at a decade to kind of get there, but given kind of the pace of innovation around AI that you've seen.

Mark Mahaney: Timeline changed and do you think we'll get there quicker and then the second question for Susan just quickly on shop at I. Appreciate the color. Obviously, we've had the Amazon partnership news intra quarter.

Mark Elliot Zuckerberg: You know, obviously, we've had the Amazon partnership news intercourter. You know, we know META has made a few attempts at getting kind of more integrated into shopping, you know, over the last few years. Can you share some of the learnings and, I guess, what's different this time around? Thank you. Sure, I could. I do think that AI is going to make all of the products and services that we use and make better. So it's hard to know exactly how that will play out. But for the work in reality labs specifically, there are a bunch of areas, like if you take smart glasses.

Mark Mahaney: We know Matt has made a few attempts and getting kind of more integrated into shopping over the last few years can you hear some of the learnings and I guess, what's different this time around thank you.

Mark Mahaney: Okay.

Susan Li: Sure I can to exit the first one.

Susan Li: I do think that AI is going to make all of.

Speaker Change: The products and services that we use and make better.

Speaker Change: So it's hard to know exactly how that will play out.

Speaker Change: But for the work in reality labs, specifically, there's a bunch of areas like if you take smart glasses.

Mark Elliot Zuckerberg: Before, we thought that we would have to build full displays and holograms and deliver the sense of presence before that became a mainstream product. Now, it seems quite possible that smart glasses that have AI assistance built in will be the killer app, and that the holograms and sense of presence will come later as a, maybe on the same time horizon we were talking about before, but it could end up being just as important as we expected, but there could be So I think we'll figure that out over the next few years. But yeah, I mean, overall, I think the two go together pretty hand in hand.

Before we thought that we would have to build like full displays and holograms and deliver the sense of presence before that became a mainstream product.

Speaker Change: Now it seems quite possible that smart glasses that have.

Speaker Change: AI assistance built and will be the killer app and that the holograms incentive presence will come later as a maybe at the same time horizon. When we were talking about before but you could end up being just as important as we expected, but there could be a big market here, even before that so I think I think we'll figure that out over the next few years.

Speaker Change:

Speaker Change: But yes, I mean overall I think the two go together pretty hand in hand.

Mark Elliot Zuckerberg: You know, I would have predicted that a lot of the parts of reality labs. I guess the sequence in technology is sometimes surprising. We always kind of expected that as part of building glasses or any of these platforms, having an AI assistant would be a foundational part of it, but the fact that there have just been big strides in that over the last year or two is a big opportunity for these products sooner. So I think it's still unknown exactly how that will play out, but I think we'll know more over the next few years. It's very exciting. Mark, I can take the second question.

Speaker Change: I would have predicted that that a lot of the parts of reality labs.

Speaker Change: I guess the sequencing technology is sometimes surprising.

Speaker Change: We always kind of expected that as part of building glasses or.

Speaker Change: <unk> of these platforms that are having an AI assistant would be a foundational part of it but the fact that that's that there just aren't big strides in that over the last year or two is.

Speaker Change: Just as a big opportunity for this product sooner. So I think it's still unknown exactly how that will play out, but I think we'll know more over the next few years, it's very exciting though.

Speaker Change: And Marc I can take the second question. So first of all you know online commerce continues to be one of our strongest verticals overall.

Susan D. Desmond: First of all, online commerce continues to be one of our strongest verticals overall. A lot of the work that we do to improve ad performance generally really helps do things like grow conversions year over year and improves the performance of direct response ads. We've invested a lot in the Advantage Plus set of tools, tools like Advantage Plus Shopping. I would say that our offerings for e-commerce advertisers overall are very strong, and we continue to invest in making them better and more performant. On Shops ads specifically, this is an area where we are really, I would say, focusing on introducing improvements that continue to make it easier for businesses to onboard to Shops. For example, eligible Shopify businesses can now onboard to Shops on Facebook and Instagram very seamlessly, and we're making it easier for advertisers to turn their existing ads into Shops ads.

Marc: And a lot of the work that we do to improve AD performance generally are you know really helps.

Marc: It helps to things like ROE, you know conversions year over year and improves the performance of of direct response ads. We've invested a lot in the advantage plus set of tools tools like advantage plus shopping so I would say that our offerings for E. Commerce advertisers overall are very strong and we continue to invest in.

Marc: And making them better and more performance on shops ads.

Marc: Specifically.

Marc: This is an area, where we are really I would say focusing on introducing improvements that continue to make it easier for businesses to onboard two shops. So for example eligible shopify businesses can now onboard to shops on Facebook and Instagram are very seamlessly and we're making it easier for advertisers to turn.

Marc: Their existing ads into shops ads and we will continue to focus on deepening integrations with partners and leveraging AI to make shops adds even more and even more performance you mentioned the Amazon ads pilot.

Susan D. Desmond: We'll continue to focus on deepening integrations with partners and leveraging AI to make Shops ads even more performant. You mentioned the Amazon ads pilot, and that's where we're partnering with Amazon to make Buy with Prime to create a more seamless shopping experience on Facebook and Instagram so that it's easier for people to purchase directly from an Amazon ad. This is really early, and we're testing this experience with them, but it's another avenue for us to explore how we can make the shopping experience easier for folks on our platform. Your next question comes from the line of Justin Post from Bank of America. Please go ahead.

Marc: Pilot and that's a place where we're partnering with Amazon to make buy with prime to create a more seamless shopping experience on Facebook and Instagram, so that it's easier for people to purchase directly from an Amazon AD. You know this is really early and we're testing this experience with them, but it's another avenue for us to explore how can we make the shopping experience.

Marc: <unk> easier for folks on our platform.

Marc: Your next question comes from the line of Justin Post from Bank of America. Please go ahead.

Justin Post: Great. I was wondering if you could help us think about the messaging run rate for revenues and maybe the long-term opportunity and how you think about that going forward on a multi-year basis. And then secondly, you know, the guidance for Q1 suggests stable growth at the midpoint, despite comps getting tougher. So wondering if you could help us at all think about, you know, the comps getting increasingly tougher as we go through the year, how you think about those comps and how you could grow in the second half. Thank you. Thanks, Justin. I can take it...

Justin Post: Great I was wondering if you could.

Justin Post: Help us think about the messaging run rate for revenues and maybe the long term opportunity.

Justin Post: How do you think about that going forward, our multiyear basis, and then secondly, the guidance for Q1 suggests stable growth at the midpoint despite comps getting tougher. So I'm wondering if you could help us at all think about.

Justin Post: Commscope increasingly tougher as we go through the year, how you how youre thinking about those comps and how you could grow in the second half. Thank you.

Speaker Change: Thanks, Justin I can take both of those so on your first question about about messaging monetization you know right now the two primary avenues that we have there our click to messaging ads and paid messaging.

Susan D. Desmond: So on your first question about messaging monetization, right now, the two primary avenues that we have there are click-to-message ads and paid messaging, which we are investing a lot in both to facilitate the full cycle of customer engagement. We saw that revenue growth from click-to-message ads remained strong in Q4. We see broadening advertiser adoption, and there, I would say that our focus, in terms of where we're investing, is really around enhanced optimization and reporting. So we're really trying to drive down funnel performance, enabling businesses to optimize for purchase.

Speaker Change: We are investing a lot in both to facilitate the full cycle of of customer engagement. We saw that revenue growth from click to messenger ads remained strong in Q4, we see broadening advertiser adoption and there I would say that our focus in terms of where we're investing is really around enhanced optimization and reporting.

Speaker Change: So we're really trying to drive down funnel performance, enabling.

Speaker Change: Enabling businesses to optimize for purchase and we've seen strong growth in purchase optimization revenue.

Susan D. Desmond: And we've seen strong growth in purchase optimization revenue on click-to-messenger ads since we rolled that out. And we're planning to bring purchase optimization to click-to-WhatsApp campaigns this year. And, you know, across the click-to-messaging ads, we're introducing more robust reporting to help advertisers kind of understand how people are engaging with them via click-to-messaging ads and what the value of that engagement is

Speaker Change: On click to messenger ads since we've rolled that out and we're planning to bring purchase optimization to click to whatsapp campaigns. This year and you know across the click to messaging ads, we're introducing more robust reporting to you know to help.

Speaker Change: Advertisers kind of understand.

Speaker Change: How people are engaging with them via click to messaging ads and what is the value of that engagement and then of course in the longer term. This is a place where we're excited about the opportunities for increased automation.

Susan D. Desmond: And then, of course, in the longer term, this is a place where we're excited about the opportunities for increased automation to really help businesses scale their ability to have conversations with their consumers. On the paid messaging side, this is much earlier, of course, but we're seeing good momentum driven by particularly strong growth from marketing messages. And we've also seen good results from our updated pricing model that we introduced in June. And here, you know, we're really focused on making paid messaging easier to buy. So we're now testing the ability for businesses to send paid messaging directly on Meta Ads Manager.

Speaker Change: To really helps businesses scale their ability to have conversations with them with their with their consumers.

Speaker Change: On the paid messaging side this.

Speaker Change: This is much earlier of course, but we're seeing good momentum.

Speaker Change: Driven by particularly strong growth from marketing messages and we've also seen good results from our updated pricing model that we introduced in June and here, we're really focused on making paid messaging easier to buy so we're now testing the ability for businesses to send paid messaging directly on meta ads manager.

Susan D. Desmond: And then again, similar to click-to-messaging, we are investing in ways to make it easier to get more done within the app. So here we launched Flows globally in October, which enables businesses to offer richer user experiences within WhatsApp, things like selecting a seat on a flight or booking an appointment. We're seeing good early traction, and we're focused on just introducing more ways to help businesses easily create flows, and we'll plan on introducing more capabilities here. So there's a lot I would say going on in the portfolio of messaging monetization work that we're doing. Now, your second question was around the 2024 outlook. And, you know, we obviously have not shared any guidance beyond Q1, but, you know, our revenue for the full year is going to be influenced by a number of factors, including macro conditions that are certainly harder to predict the further out you go.

Speaker Change: And then again similar to click to messaging, we are investing in ways to make it easier to get more done within the app. So here, we launched flows globally in October.

Speaker Change: Which enables businesses to offer richer user experiences with within Whatsapp things like selecting a seat on a flight or booking an appointment we're seeing good early traction and we're focused on just introducing more ways to help businesses easily create flows and we'll plan on introducing more capabilities here. So there's a lot I.

Speaker Change: I would say going on in the portfolio of of messaging monetization and work that we're doing.

Speaker Change: Now your second question.

Speaker Change: It's around the 2024 outlook and we obviously have not shared any guidance beyond Q1, but you know our revenue for the full year is going to be influenced by a number of factors, including macro conditions that are certainly harder to predict the further out you go.

Susan D. Desmond: And over the course of 2024, as you said, we'll also be lapping periods of increasingly, you know, strong demand. So, we, you know, we don't provide guidance beyond Q1. There's certainly a range of outcomes, and we'll have a better read on how we will compare to future quarters as we progress through the year. Your next question comes from Doug Anmuth from J.P. Morgan. Please go ahead. Thanks for taking the questions. One for Mark and one for Susan.

Speaker Change: And over the course of 2024 as you said, we'll also be lapping periods of increasingly strong demand. So.

Speaker Change: We you know we don't provide guidance beyond Q1, there's certainly a range of outcomes and we'll have a better read on how we will compare to future quarters as we progress through the year.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Doug Anmuth from Jpmorgan. Please go ahead.

Doug Anmuth: Thanks for taking the questions one for Mark one for Susan Mark I believe you shifted their out of reality labs.

Doug Anmuth: Mark, I believe you shifted FAIR out of reality labs and into the family of apps. Can you just talk about some of the benefits of moving that group as you pursue general intelligence? And then Susan, can you just walk us through your thought process on adding a dividend to your capital returns at this stage beyond the share repurchases? Thank you. I can talk about the first one.

Doug Anmuth: Apps can you just talk about some of the benefits there moving that group as you pursue general intelligence.

Doug Anmuth: And then Susan can you just walk us through your thought process on adding a dividend to capital work.

Doug Anmuth: Share repurchases. Thank you.

Mark: I can talk to the first one yes, the whole reason why we moved fair.

Mark Elliot Zuckerberg: Yeah, the whole reason why we moved FAIR is basically to be closer to the Gen AI group. They're both research groups. The Gen AI group basically builds our LLAMA, Launch Vehicles, and Products but also conducts a fair amount of research too, especially things that are going to be coming into the upcoming versions of LLAMA. Fair is focused on more foundational work and longer-term work, so it's, I'd say, you know, more things that might be a couple years out to ten-plus years out. As we, Yeah, I guess. Here's one way to think about it.

Apps: Basically to be closer to the Gen. AI group, they're both research groups. The <unk> group basically builds our llama.

Apps: Launch vehicles and products, but also conducts a fair amount of research to especially things that are going to be coming into the upcoming versions of llama.

Apps:

Apps: Fair is focused on more foundational work and longer term work. So it's it's I would say more things that might be a couple years out to 10 plus years out.

Apps:

Apps: And.

Apps: As we.

Apps: Yes, I guess, here's one way to think about it a lot of last year and the work that we're doing with Lama three is basically making sure that we can scale our efforts to really produce state of the art.

Mark Elliot Zuckerberg: Last year and the work that we're doing with LLAMA 3 is basically making sure that we can scale our efforts to really produce state-of-the-art models. But once we get past that, there's a lot more kind of different research that I think we're going to be doing that's going to take our foundation models in potentially different directions than other players in the industry are going to go in because we're focused on a specific vision for what we're building. So it's really important as we think about what's going to be in LLAMA 5 or 6 or 7, and what cognitive abilities we want in there, and what modalities we want to build into future multimodal versions of the models, we need to be doing that work in advance and researching those things.

Apps: But once we get past that.

Apps: There's a lot more kind of different research that I think we're going to be doing and thats going to take our foundation models and potentially different directions than other players.

Apps: And the industry are going to go in because we're focused on on.

Apps: Specific.

Apps: <unk> vision for what for what were building.

Apps: So it's really important as we think about what's going to be an lama five or six or seven and what cognitive ability as we want in there and what modality is we want to.

Apps: Built into future multimodal versions of the models we.

Apps: We need to be doing that work in advance and to.

To research those things and it helps to too and even though fair and Jenny I will continue to be to kind of separate groups on different time horizons I think to have some level of alignment between.

Mark Elliot Zuckerberg: And it helps to, and even though FAIR and Gen-AI will continue to be two kind of separate groups on different time horizons, I think it's important to have some level of alignment between the vision of what we're building between the two of them, so that way, you know, the FAIR team can have in mind, hey, if we research this, then maybe it can intercept LLAMA 6 or something.

Apps: On the vision of what we're building between the two of them. So that way the fair team can have in mind, Hey, if we researched this and maybe it can intercept lama six or something.

Susan D. Desmond: Then that, I think is just going to be more helpful for increasing the ambition and focus of all of the work that we do. It's, you know, one of the reasons why I talked about doing open-ended research on an AI for a while. But having a clear product target with these AI agents is, I think, is really going to help focus the work and give us a feedback loop that's going to increase the productivity and output that we get dramatically. Doug, on your second question about why now in terms of initiating a dividend, returning capital to shareholders remains an important priority for us, and we believe introducing a dividend really just serves as a nice complement to the existing share repurchase program.

Apps: Not that I think is just going to be more helpful for increasing the ambition and focus of all of the work that we do.

Apps: It's one of the reasons that I talked about we did open ended research on it.

Apps: AI for a while.

Apps: But.

Apps: Having a clear product target with these AI agents I think is really going to help focus the work and give us a feedback loop, that's going to increase the productivity and.

Apps: And output that we get dramatically.

Speaker Change: Doug on your second question about why now in terms of initiating a dividend returning capital to shareholders remains an important priority for us and we believe introducing a dividend really just serves as a nice complement to the existing share repurchase program. The dividend doesn't change how much we will be or it doesn't change the way we.

Susan D. Desmond: The dividend doesn't change how much we will be, or the way we determine the total amount of capital we return. We expect that share repurchases will continue to be the primary way that we return capital to shareholders, but introducing a dividend just gives us a more balanced capital return program and some added flexibility in how we return capital in the future.

Speaker Change: We determined the total amount of capital we return.

Speaker Change: And we expect that share repurchases will continue to be the primary way that we return capital to shareholders, but introducing a dividend just gives us more.

Speaker Change: More balanced capital return program and some added flexibility in how we return capital in the future.

Susan D. Desmond: Your next question comes from the line of Ron Josie from Citi. Please go ahead. Great. Thanks for taking the question, Mark. I hope your knee is getting better.

Speaker Change: Your next question comes from the line of Ron Josey from Citi. Please go ahead.

Ron Josey: Great. Thanks for taking the question Mark I Hope your knee is getting better I wanted to ask you about Apple opening up its app store in Europe, and maybe what role that might play for meta and certainly further building out the app store app install ads and things along those lines and Susan as a follow up to maybe a prior question you mentioned the potential around business messaging and what the team is doing it.

Ron Josie: I wanted to ask you about Apple opening up its app store in Europe and maybe what role that might play for META and further building out the app store, app install ads, and things along those lines. And Susan, as a follow-up to maybe a prior question, you mentioned the potential for business messaging and what the team's doing around really testing with WhatsApp and Messenger. Just talk to us how you might see this unfold, maybe with AI Studio, and any timing would be helpful. Thank you. I don't think that the Apple thing is going to have any difference for us because I think that the way that they've implemented it is so onerous and, I think, so at odds with the intent of what the EU regulation was, that I think it's just going to be very difficult for anyone, including ourselves, to really seriously consider what they're doing there. Susan, did you want to add anything? Nope.

Speaker Change: Early testing with Whatsapp and messenger just talk about how you might see this unfold maybe with AI studio any timing would be helpful. Thank you.

Speaker Change: I don't think that the Apple thing is going to have any difference for us because I think that the way that they've implemented it I would be very surprised if any developer chose to go into the alternative app stores that they have submitted so onerous.

Speaker Change: Zinc so at odds with the intent of what the EU regulation was.

Speaker Change: I think it's I'm, just going to be very difficult for anyone including ourselves to really seriously entertained with what theyre doing there soon.

Speaker Change: Susan do you want to anything no I was going to take the second question I think which was a around the.

Mark Elliot Zuckerberg: I was going to take the second question, I think, which was around the rollout of some of the Gen AI features from a monetization perspective, and, you know, we're, first of all, I would say that we don't expect our Gen AI products to be a meaningful 2024 driver of revenue, but, you know, we certainly expect that they will have the potential to be meaningful, to be meaningful contributors over time. Right now, the most near-term monetization opportunity is with our ad creative tools. You know, we've talked about some of the places that we've been rolling those features out broadly, with text variations and image expansion now globally available, and we're seeing those tools receive adoption and provide real value for advertisers even at this early stage, and we're going to keep investing in making those more useful and performant, which then leads to more advertiser adoption, Over a longer time frame, the Gen AI features that we're bringing to business messaging, which I think was where your question originated, we think really represent a compelling opportunity. We're testing AI chats on a very small scale today with a few businesses, but it will take time to continue making those AIs increasingly useful.

Speaker Change: The rollout of some of the Gen. AI features from a monetization perspective.

Susan Li: And you know where first of all I would say that we don't expect our gen II products to be a meaningful 2020 for a driver of revenue.

Susan Li: But we certainly expect that they will have the potential to be meaningful to be meaningful contributors over overtime right now the most near term monetization opportunity is with our AD creative tools. You know we've talked about some of the places that we've been rolling those features out broadly with text variations in image expansion.

Susan Li: Now globally available and we're seeing those tools receive adoption and provide real value for advertisers even at this early stage and we're going to keep investing and making those more useful and performance, which then leads to more advertiser adoption and that can be sort of a virtuous.

Susan Li: You know feedback loop over a longer timeframe. The gen. AI features that we're bringing to business messaging, which I think was where your question originated you know we think really represents a compelling opportunity.

Susan Li: We're testing AI chat on a very small scale today with a few businesses, but it will take time to continue making those AI is increasingly useful we're hearing good feedback from the business is testing them and we expect to make progress. This year as we expand our tests further you know I'd say one other thing is just on the consumer side again, we think gen AI can may.

Susan D. Desmond: We're hearing good feedback from the businesses testing them, and we expect to make progress this year as we expand our tests further. I'd say one other thing: on the consumer side, again, we think Gen AI can make it easier for people to produce compelling content across all of our apps, including our messaging apps, and our AI assistant certainly provides added utility. In all of these areas, I would say we're following our typical playbook of testing and tuning the experiences until they're very good, and then we'll invest in growth and eventually explore monetization. Krista, we have time for one last question. Your last question comes from the line of Ross Sandler from Barclays. Please go ahead.

Susan Li: It easier for people to produce compelling content across all of our apps, including our messaging apps and our AI assistant you know certainly provides also added utility so and all of these areas I would say we're following our typical playbook of testing and tuning the experiences until you know they are very good and then we will invest in growth and eventually explore monetization.

Speaker Change: Krista, we have time for one last question.

Speaker Change: Yeah.

You are.

Speaker Change: Last question comes from the line of Ross Sandler from Barclays. Please go ahead.

Ross Sandler: Great. Mark, I'm just curious what you're seeing with META AI at this stage. You talked about rapid iteration of that given your large audience. So yeah, I guess what's going on thus far. Which of the apps in the family of apps is seeing an engagement increase from META AI? And do you think that there could be increased commercial activity as either your AI agent or some of the other ones out there get more usage within your apps? Thanks a lot.

Ross Sandler: Great Mark just curious what youre seeing with meta AI at this stage you talked about rapid iteration.

Ross Sandler: Of that given your large audience.

Speaker Change: So, yes, I guess.

What's going on thus far which are the apps.

Ross Sandler: The family of apps as seen engagement increase from meta AI and do you think.

Ross Sandler: There could be increased commercial activity is either your AI agent or some of the other ones out there.

Ross Sandler: Get more usage within your apps, thanks a lot.

Mark Elliot Zuckerberg: Yeah, I think having a good assistant is going to be one of the real values that This Generation of AI creates, as well as giving every creator an opportunity to have an assistant or agent that people can engage with, and every business an agent, and also allowing people to create a bunch of quirky and fun things as well. But yeah, I think that AI is going to be very important across products. It is currently available in some countries in WhatsApp, Messenger, and Instagram.

Speaker Change: Yes, I think having a good system is going to be one of the real values that.

Speaker Change: This generation of AI creates.

Speaker Change:

Speaker Change: As well as giving every creator and opportunity to have an assistant or agent that people can engage with and every business in an agent and also allowing people to create a bunch of corky and fun things as well, but yeah. I think I think that AI is going to be very important across the products.

Speaker Change: It currently is available in.

Speaker Change: In some countries and Whatsapp messenger and Instagram, it's at the phase, where we're not really pushing it super.

Mark Elliot Zuckerberg: It's at the phase where we're not really pushing it super proactively. We've sort of made it available, and as people use it, you know, we're learning from what the basic ways that people want to engage with it. We're currently in the tuning phase on this. I mean, we started rolling this out. I think it was in November or so, maybe maybe October.

Speaker Change: Proactively we've sort of made it available and as people use it.

Speaker Change: We're learning from how what what are the basic ways that people want to engage with it.

Speaker Change: We're currently in the in the tuning phase on this I mean, we started rolling this out I think it was and and in November So maybe maybe October.

Speaker Change:

Speaker Change: And I would expect that.

Mark Elliot Zuckerberg: And I would expect that, over the course of this year, we are going to start rolling this out much more prominently across our apps. And that was sort of what I was saying in my opening. We had a couple of remarks about the analogy to stories where we ran a bunch of experiments, put them out there, got feedback, and then eventually did a lot of integrations, even to the point where people were making, you know, jokes about us putting stories in settings, which, for the record, never happened, but I found funny. So I think that we're going to be on that journey this year. We're basically in the learning and tuning phase now, and I'm happy with how that's going. We're currently working on and planning the next set of integrations and places where this is going to be available to people across the products, and I'm really looking forward to that. And I think that's going to be one of the big themes for 24 for us.

Speaker Change: Over the course of this year, we were going to start rolling this out much more prominently across our apps and that was sort of what I was saying in my opening.

Speaker Change: Our remarks about the analogy to stories, where we ran a bunch of experiments put it out there got feedback and then eventually did a lot of integrations even to the point where.

Speaker Change: People were making jokes about us putting stories in settings, which for the record never happened, but I found funny.

Speaker Change:

Speaker Change: So I think that we're going to be on that journey. This year, we're basically in the learning and tuning phase now I'm happy with how that's going we're currently working on and planning. The next set of integrations and places where this is going to be available to people across the products and I'm really looking forward to that and I think that's going to be one of the big themes for 'twenty four for us.

Operator: Great. Thank you for joining us today. We appreciate your time, and we look forward to speaking with you again soon. This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Speaker Change: Great. Thank you for joining us today, we appreciate your time and we look forward to speaking with you again soon.

Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.

Speaker Change: Yeah.

Speaker Change: Yeah.

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Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.