Meta Revenue Breakdown, Profitability And Margin

Meta’s Family Of Apps. Pixabay Image.

This article presents the revenue and revenue breakdown of Meta Platforms, Inc. (NASDAQ: META).

In addition to the revenue, we also explore Meta’s profitability and margin.

Investors interested in Meta’s revenue by user geography may visit the page here: Meta Revenue By Country And Region.

Please use the table of contents to navigate through the page.

How Meta Earns Revenue

Meta revenue streams and products

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Meta Platforms, Inc.’s (META) revenue streams consist of two segments: Family Of Apps (FoA) and Reaility Labs (RL).

Family of Apps gets its revenue primarily from selling 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, Reality Labs reflects Meta’s efforts to develop the metaverse and gets its revenue from sales of consumer hardware products, software, and content.

These products include augmented and virtual reality-related consumer hardware, software, and content that help people feel connected anytime, anywhere.

The Meta Quest is one such product and service that helps friends and families stay connected and share the moments that matter in meaningful ways with cutting-edge VR hardware, software, and content.

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Revenue By Year

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Meta earned revenue of US$116.6B, US$117.9B, and US$86B in the year ended on Dec 31, 2022, 2021, and 2020, respectively.

Meta’s total revenue has grown by over 800% since fiscal year 2014.

Meta experienced its first revenue decline in nine years during fiscal year 2022, indicating a potential slowdown in revenue growth in post-pandemic periods.

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Growth Rates Of Revenue By Year

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Meta’s revenue growth decreased from 37% YoY in fiscal 2021 to -1.1% in fiscal 2022.

Meta’s revenue decline in fiscal 2022 was the first after the COVID-19 pandemic.

Meta’s annual revenue growth averaged 38% before 2022 but decreased to 33% in fiscal year 2022 due to the negative increase in 2022.

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Revenue By Quarter

Meta-total-revenue-by-quarter

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In 3Q 2023, Meta earned revenue of US$34 billion, up 21% over the same quarter a year ago.

For 1Q and 2Q 2023, Meta’s total revenue came in at US$28.6 billion and US$32 billion, respectively, also up significantly over the same periods in 2022.

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Revenue By TTM

Meta-total-revenue-by-ttm

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The TTM plot above appears much smoother and nicer than the quarterly plot.

That said, Meta earned revenue of US$127 billion as of 3Q 2023 on a TTM basis, up 7.6% over the same quarter a year ago.

The total revenue has experienced a seemingly miraculous rise since fiscal year 2014.

However, Meta’s revenue growth seems to have encountered a minor setback in fiscal year 2022.

In fiscal year 2023, Meta’s revenue rebounded from the setback in 2022 and continued to rise.

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Growth Rates Of Revenue By TTM

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Although Meta’s revenue has been on an astonishing rise, revenue growth has considerably slowed, as presented in the chart above.

As depicted in the plot above, Meta’s revenue growth has been on a downward trend.

Since fiscal 2023, Meta’s revenue growth has been in the low single digits, and the growth rate came in at only 7.5% as of 3Q 2023, one of the lowest figures ever measured since 2015.

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Advertising Revenue By Year

Meta-advertising-revenue

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Advertising revenue is the most important revenue source for Meta.

Despite striving to venture into the metaverse, Meta continues to depend mainly on advertising revenue.

That said, Meta earned advertising revenue of US$113.6 billion in fiscal 2022, roughly in line with the figure reported in 2021.

Compared to 2020, Meta’s advertising revenue of US$113.6 billion reported in 2022 represents a rise of 35%.

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Growth Rates Of Advertising Revenue By Year

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Meta’s advertising revenue grew 36.6% in fiscal 2021 but declined by 1.1% in fiscal 2022.

The decline of Meta’s advertising in fiscal 2022 was the first since 2015.

Additionally, Meta’s advertising revenue has consistently grown at a similar rate to its total revenue, indicating its significant contribution to overall revenue.

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Advertising Revenue As A Percentage Of Total Revenue

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Meta’s advertising revenue consistently accounts for over 90% of its total revenue.

This figure has risen from 92% in 2014 to 98% as of 3Q 2023, indicating the growing importance of advertising revenue to Meta Platforms, Inc.

Despite the hype surrounding the metaverse, the Family of Apps’ advertising revenue continues to be the primary source of revenue for Meta.

This suggests that while the metaverse may hold great potential for Meta in the future, the company’s advertising business remains a crucial component of its success in the present.

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Growth Rates Of Advertising Revenue By TTM

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Similar to the consolidated revenue, Meta’s advertising revenue growth rates also have significantly declined over the years.

That said, Meta’s advertising revenue has only grown by low single digits in recent periods, as shown in the chart.

As of 3Q 2023, Meta’s growth rate in advertising revenue came in at only 8.2% on a TTM basis, one of the lowest figures ever measured since 2015.

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Family Of Apps (FoA) Revenue

Family Of Apps Revenue

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The Family of Apps (FoA) is a major segment of Meta Platforms, Inc., primarily generating revenue from advertising.

The products under the FoA include Facebook, Instagram, Messenger, and WhatsApp.

As shown in the chart above, advertising revenue accounts for the lion’s share of FoA’s consolidated revenue.

Meta’s FoA earned advertising revenue of US$113.6 billion, US$114.9 billion, and US$84.2 billion in the years ended on Dec 31, 2022, 2021, and 2020, respectively.

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Reality Labs (RL) Revenue

Reality Labs Revenue

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Meta’s Reality Labs (RL) is the division responsible for developing the metaverse.

That said, Reality Labs’ revenue was much smaller than that of the Family Of Apps.

In fiscal 2022, Reality Labs’ revenue came in at only US$2.2 billion, roughly in line with 2021.

Although RL’s revenue growth was stagnant in 2022 compared to 2021, it nearly doubled compared to 2020.

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FoA And RL Revenue In Percentage

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Family Of Apps’ revenue accounts for most of Meta’s total revenue, at 98.1% as of fiscal 2022.

This trend is expected as advertising revenue is the primary source of income for Family of Apps.

In fiscal 2022, advertising revenue accounted for 97.5% of Meta’s total revenue.

On the other hand, Reality Labs’ revenue makes up only a small portion of Meta’s total revenue.

In fiscal 2022, Reality Labs’ ratio was only 1.9%.

Despite the insignificant revenue contribution from Reality Labs, the ratio has considerably risen since fiscal 2019.

For example, in fiscal 2019, Reality Labs contributed to only 0.7% of Meta’s total revenue, and this ratio has increased to 1.9% as of 2022.

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FoA And RL Operating Income

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Family Of Apps is the only segment that has reported a profit all these years.

On the other hand, Reality Labs has yet to turn a profit.

In fiscal 2022, Family Of Apps earned an operating income of US$42.7 billion compared to an operating loss of US$13.7 billion for Reality Labs.

A primary concern is the significant increase in operating loss incurred by Reality Labs, which reached a record high of US$13.7 billion in 2022, the largest loss reported since 2019.

In summary, Meta’s advertising segment is a more profitable business than selling hardware and software in the metaverse.

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FoA And RL Operating Margin

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The Family of Apps has an operating margin exceeding 40%, while Reality Apps still operates at a loss.

In fiscal 2022, Family Of Apps’ operating margin totaled 37%, down significantly from the 49% reported in 2021.

On the other hand, Reality Labs’ operating loss slipped to -635% in 2022 compared to -448% reported in 2021.

Again, Meta’s Family of Apps is a much more profitable segment than Reality Labs.

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Conclusion

Meta Platforms, Inc. makes money primarily from selling advertising space on its platforms, such as Facebook, WhatsApp, Messenger, and Instagram.

Meta Platforms operates in two reportable segments: Family of Apps and Reality Labs.

Family Of Apps is a much bigger revenue driver than Reality Labs, and it is also a much more profitable business segment.

Margin-wise, Family Of Apps topped 49% in 2021 and 37% in 2022, while Reality Labs operated at a loss.

In short, Family of Apps makes more money and is much more profitable than Reality Labs.

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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.

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Disclosure

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