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Meta Revenue Breakdown, Profitability And Margin By Segment

Meta’s Family Of Apps. Img: Pixabay

Meta Platforms, Inc’s (META) revenue consists of 2 major segments and they are Family Of Apps (FoA), and Reaility Labs (RL).

According to Meta Platforms, Inc., the Family of Apps (FoA) business segment gets its revenue primarily from the sales of advertising placements to marketers.

Marketers purchase ads that can appear in multiple places including on Facebook, Instagram, Messenger, and third-party applications and websites.

On the other hand, the Reality Labs (RL) business segment generates revenue from sales of consumer hardware products, software, and content.

These include augmented and virtual reality products that help people feel connected, anytime, anywhere.

For example, the Meta Quest and Facebook Portal are such products and services that help friends and families stay connected and share the moments that matter in meaningful ways with cutting-edge VR hardware, software, and content.

That said, in this article, we will explore not only Meta’s revenue breakdown by segment but also the profitability and margins of each business sector.

Let’s get started!

Meta Revenue Breakdown

Meta Revenue Breakdown

Meta Revenue Breakdown (click to enlarge)

* Meta’s revenue breakdown is obtained directly from the company’s annual report.
* Meta’s fiscal year begins on Jan 1 and ends on Dec 31.

As mentioned, Meta’s revenue is broken down into 2 major segments as shown in the figure above and they are Family of Apps (FoA) and Reality Labs (RL).

Family of Apps (FoA) generates sales primarily from advertisement through several platforms, including Facebook, Instagram, Messenger and WhatsApp.

On the other hand, Reality Labs gets its sales through augmented and virtual reality-related consumer hardware, software and content.

Let’s move on to look at the revenue figures.

Family Of Apps (FoA) Revenue

Family Of Apps Revenue

Family Of Apps Revenue (click to enlarge)

* FoA’s revenue is obtained directly from Meta’s annual report.
* Meta’s fiscal year begins on Jan 1 and ends on Dec 31.

Meta’s Family Of Apps which includes Facebook, Instagram, Messenger, and WhatsApp gets its revenue primarily from advertising as shown in the chart above.

In 2021, Meta’s Family Of Apps generated a massive $116 billion in total revenue, a lion’s share of it, notably at $115 billion or 99%, came from advertising.

Total Family Of Apps’ revenue increased 36% in 2021 from the prior year while advertising revenue increased 37% year-on-year.

As of 2022 Q3, advertising revenue came in at $82 billion for the 9 months that ended 30 September 2022, roughly in line with that of 2021, according to the 3Q quarterly release.

During the same period, the total Family Of Apps revenue topped $83 billion, also in line with that of the same period in 2021.

A trend worth talking about is the rising advertising revenue since 2019 which averaged roughly 28% year-on-year and 2021 revenue growth was the best ever reported since 2019.

Can Meta replicate its revenue growth of 2021 in 2022? Probably.

Reality Labs (RL) Revenue

Reality Labs Revenue

Reality Labs Revenue (click to enlarge)

* RL’s revenue is obtained directly from Meta’s annual report.
* Meta’s fiscal year begins on Jan 1 and ends on Dec 31.

On the other hand, Reality Labs’ revenue was much smaller than that of the Family Of Apps.

As seen in the chart above, Meta Reality Labs’ revenue came in at only $2.3 billion in 2021, making up roughly 2% of the total revenue.

As of 2022 3Q, Reality Labs earned $1.4 billion in sales for the 9 months that ended 30 September 2022, which was about 3% higher than the same period in 2021, according to the Q3 quarterly release.

Despite the much smaller revenue figure compared to that of the Family Of Apps segment, Reality Labs’ sales growth rate has been phenomenal.

For example, Reality Labs’ revenue increased 100% in 2021 from 2020, and 127% in 2020 from 2019.

Can Meta’s Reality Labs replicate the same phenomenal growth in 2022?

Probably not as Reality Labs’ revenue has so far grown only 3% for the 9 months that ended 30 September 2022 compared to the same period reported a year ago, according to the Q3 quarterly release.

Nevertheless, Meta’s Reality Labs is a relatively new business segment and may take some time to evolve.

Investors should probably be patient with Meta’s new initiatives.

Operating Profit By Segment

Meta Operating Profit By Segment

Meta Operating Profit By Segment (click to enlarge)

* Operating profit by segment is obtained directly from Meta’s annual report.
* Meta’s fiscal year begins on Jan 1 and ends on Dec 31.

While Meta’s revenue by segment has been on the rise as seen in prior charts, it may not be making any profit.

In this section, we will look at the operating profit by segment to find out the profitability of each business sector.

That said, Meta’s Family Of Apps has been a profitable business segment while Reality Labs has been incurring losses between 2019 and 2022.

For example, in 2021, Family Of Apps’ operating income totaled $57 billion, up 46% from a year ago.

On the other hand, Reality Labs suffered an operating loss of a massive $10 billion in 2021, roughly 55% worse than the loss in 2020.

Despite the massive profit made in 2021, Family Of Apps’s operating income in 2022 seems to be losing ground.

For example, as of Q3 2022, Family Of Apps’ operating income totaled only $32 billion for the 9 months that ended 30 September 2022, down 22% from the same period a year ago, according to the 3Q quarterly release.

While Family Of Apps’ revenue in 2022 remained roughly in line with that of 2021 for the 9-month period, it made significantly less profit.

Nevertheless, Meta Family of Apps’ advertising segment is a much more profitable business than Reality Labs’ hardware and software products.

Operating Profit Margin By Segment

Meta Operating Profit Margin By Segment

Meta Operating Profit Margin By Segment (click to enlarge)

* Operating profit margin by segment is calculated and obtained directly from Meta’s annual report.
* Meta’s fiscal year begins on Jan 1 and ends on Dec 31.

In terms of margin comparison, Meta’s Family Of Apps business sector is a significantly more profitable business than Reality Labs as shown in the chart above,

As seen, Family Of Apps’ operating margin totaled 49% in 2021 and represents a growth of 3 percentage points from 2020.

In contrast, Reality Labs’ operating margin slipped to -448% in 2021, driven primarily by the negative operating income.

Despite the negative margin reported in 2021, it was a much better figure compared to the -581% operating margin reported in 2020.

While Meta’s Family Of Apps operating margin has been on a rise, it declined significantly in 2022.

For the 9 months that ended 30 September 2022, Family Of Apps’ operating margin tumbled to only 38.5%, down more than 10 percentage points from the same period in 2021, according to the Q3 quarterly release.

Similar to the Family Of Apps business sector, the Reality Labs business sector also reported a much woirse operating margin in 2022.

As seen, for the 9 months that ended 30 September 2022, Reality Labs’ operating margin worsened to -659%.

Therefore, for the full-year 2022, Reality Labs’ operating margin will get even worse while Family Of Apps or indirectly, the advertising operating margin is expected to be worse off than that of 2021.

Conclusion

Meta Platform, Inc., revenue is made up of 2 major segments, Family Of Apps (FOA) and Reality Labs (RL).

Family Of Apps derives its sales primarily from advertising revenue while Reality Labs gets its revenue from virtual reality-related hardware, software, and content.

In terms of revenue figures, Family Of Apps is a much bigger revenue driver compared to Reality Labs and it is also a much more profitable business segment.

Margin-wise, Family Of Apps topped 49% in 2021 full year and 39% in 2022 ended in Q3, representing a decline of more than 10 percentage points from 2021 ended in Q3.

Meta’s Reality Labs has been incurring huge operating losses since 2019, with 2021 being the worse at -$10 billion while the loss in 2022 is expected to exceed that of 2021.

In short, Meta’s Family Of Apps, or indirectly, the advertising segment, is a profitable business segment and has been making money for the company all these years.

References and Credits

1. Meta Platform, Inc., financial figures are obtained from the company’s annual and quarterly reports which are available in Meta Investor Relations.

2. Image by Gerd Altmann from Pixabay.

Disclosure

The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.

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