Meta Platforms, Inc.

Good afternoon. My name is Krista and I will be your conference operator today. At this time, I would like to welcome everyone to the META first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be 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. And this call will be recorded. Thank you very much. Kenneth Durrell, Meta's Director of Investor Relations. You may begin.

Thank you. Good afternoon and welcome to Meta's first quarter 2025 earnings conference call. Joining me today to discuss our results are Mark Zuckerberg, CEO, and Susan Lee, CFO. Our remarks today will include forward-looking statements, which are based on assumptions as of today. Actual results may differ materially as a result of various factors, including those set forth in today's earnings press release and in our annual report on Form 10-K filed with the SEC. We undertake no obligation to update any forward-looking statement. 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.appmeta.com. And now I'd like to turn the call over to Mark.

All right. Thanks, Ken. Thanks, everyone, for joining today. We've had a strong start to the year. Our community keeps growing with more than 3.4 billion people now using at least one of our apps each day. Our business is also performing very well. And I think we're well positioned to navigate the macroeconomic uncertainty. The major theme right now, of course, is how AI is transforming everything we do. And as we continue to increase our investments and focus more of our resources on AI, I thought it would be useful today to lay out the five major opportunities that we are focused on. Those are improved advertising, more engaging experiences, business messaging, meta AI, and AI devices. And these are each long-term investments that are downstream from us building general intelligence and leading AI models and infrastructure. Even with our significant investments, we don't need to succeed in all of these areas to have a good ROI. But if we do, then I think that we will be wildly happy with the investments that we are making. The first opportunity is improved advertising. Our goal is to make it so that any business can basically tell us what objective they're trying to achieve, like selling something or getting a new customer, and how much they're willing to pay for each result. And then we just do the rest. Businesses used to have to generate their own ad creative and define what audiences they wanted to reach. But AI has already made us better at targeting and finding the audiences that will be interested in their products than many businesses are themselves. And that keeps improving. And now AI is generating better creative options for many businesses as well. I think that this is really redefining what advertising is into an AI agent that delivers measurable business results at scale. And if we deliver on this vision, then over the coming years, I think that the increased productivity from AI will make advertising a meaningfully larger share of global GDP than it is today. In just the last quarter, we're testing a new ads recommendation model for Reels, which has already increased conversion rates by 5%. And we're seeing 30% more advertisers are using AI creative tools in the last quarter as well. The second opportunity is more engaging experiences. This will come in two forms, better recommendations for existing content types and better new types of content. In the last six months, Improvements to our recommendation systems have led to a 7% increase in time spent on Facebook, a 6% increase on Instagram, and 35% on threads. Threads now also has more than 350 million monthly actives and continues to be on track to become our next major social app. In addition to better recommendations for existing content types, AI is also enabling the creation of better content as well. Some of this will be helping people produce better content to share themselves. Some of this will be AI generating content directly for people that is personalized for them. Some of this will be in existing formats like photos and videos, and some of it will be increasingly interactive. I've often talked about this long-term trend of content becoming richer over time. Our feeds started mostly with text and then became mostly photos when we all got mobile phones with cameras and then became mostly video when mobile networks became fast enough to handle that well. We are now in the video era, but I don't think that this is the end of the line. In the near future, I think that we're going to have content in our feeds that you can interact with and that it'll interact back with you rather than you just watching it. Over the long term, as AI unlocks more productivity in the economy, I also expect that people will spend more of their time on entertainment and culture, which will create an even larger opportunity to create more engaging experiences across all of these apps. The third opportunity is business messaging. Right now, the vast majority of our business is advertising in feeds on Facebook and Instagram. But WhatsApp now has more than 3 billion monthly actives with more than 100 million people in the U.S. and growing quickly there. Messenger is also used by more than a billion people each month. And there are now as many messages sent each day on Instagram as there are on Messenger. So business messaging should be the next pillar of our business in countries like Thailand and Vietnam. where there is a low cost of labor, we see many businesses conduct commerce through our messaging apps. There's actually so much business through messaging that those countries are both in our top 10 or 11 by revenue, even though they're ranked in the 30s in global GDP. This phenomenon hasn't yet spread to developed countries because the cost of labor is too high to make this a profitable model before AI, but AI should solve this. So in the next few years, I expect that just like every business today has an email address, social media account and website, they'll also have an AI business agent that can do customer support and sales. And they should be able to set that up very easily given all the context that they've already put into our business platforms. And we're gonna have more to share on upcoming calls about our progress in this area. The fourth opportunity is Meta AI. Across our apps, there are now almost a billion monthly actives using Meta AI. Our focus for this year is deepening the experience and making AI the leading personal AI with an emphasis on personalization, voice conversations, and entertainment. I think that we're all going to have an AI that we talk to throughout the day. while we're browsing content on our phones, and eventually as we're going through our days with glasses. And I think that this is going to be one of the most important and valuable services that has ever been created. In addition to building Meta AI into our apps, we just released our first Meta AI standalone app. It is personalized, so you can talk to it about interests that you've shown while browsing reels or different content across our apps. And we built a social feed into it, so you can discover entertaining ways that others are using Meta AI. And initial feedback on the app has been good so far. Over time, I expect that the business opportunity for Meta AI to follow our normal product development playbook. First, we build and scale the product. And then once it is at scale, then we focus on revenue. In this case, I think that there will be a large opportunity to show product recommendations or ads, as well as a premium service for people who want to unlock more compute for additional functionality or intelligence. But I expect that we're going to be largely focused on scaling and deepening engagement for at least the next year before we'll really be ready to start building out the business here. The fifth opportunity is AI devices, which is increasingly how we're thinking about our work on the next generation of computing platforms. Glasses are the ideal form factor for both AI and the metaverse. They enable you to let an AI see what you see, hear what you hear, and talk to you throughout the day. And they let you blend the physical and digital worlds together with holograms. More than a billion people worldwide wear glasses today, and it seems highly likely that these will become AI glasses over the next five to 10 years. Building the devices that people use to experience our services lets us deliver the highest quality AI and social experiences. And this will serve as an amplifier on all of the opportunities I've mentioned so far, as well as unlocking some new opportunities as well. Ray-Ban Meta AI glasses have tripled in sales in the last year, and the people who have them are using them a lot. We've got some exciting new launches with our partner, SLR Luxottica, later this year as well that should expand that category and add some new technological capabilities to the glasses. On Quest, we are also seeing deeper engagement as Quest 3S makes VR accessible to more people, and more people are creating experiences in Horizon with AI tools. Now, everything that I've talked about today is built on top of our AI models and our infrastructure. We released the first Llama 4 models earlier this month, and they are some of the most intelligent, best multimodal, lowest latency, and most efficient models that anyone has built. We have more models on the way, including the massive Llama 4 Behemoth model. Overall, we are focused on building full general intelligence. All of the opportunities that I've discussed today are downstream of delivering general intelligence and doing so efficiently. The pace of progress across the industry and the opportunities ahead for us are staggering. I want to make sure that we're working aggressively and efficiently. And I also want to make sure that we are building out the leading infrastructure and teams that we need to achieve our goals. So to that end, we are accelerating some of our efforts to bring capacity online more quickly this year, as well as some longer term projects that will give us the flexibility to add capacity in the coming years as well. And that has increased our planned investment for this year. More broadly, this has been a good start to what I expect will continue to be an intense year. We've got a lot more exciting work in the pipeline that I'm looking forward to sharing soon. I continue to think that this year is going to be a pivotal moment for our industry. And I am grateful for everyone who is working so hard at the company to deliver all this amazing technology and new experiences. As always, thank you all for being on this journey with us. And now, Susan.