Meta

Meta and Google are shifting their development focus away from Virtual Reality (VR) and Mixed Reality (MR) to ambient computing in the form of smart glasses given the potential that artificial intelligence adds to the form factor. I believe the annual market for smart glasses will reach hundreds of millions of units over the next decade, leading Apple to refocus its Spatial Computing initiatives to be more in line with Meta and Google wearables.

Meta reported a slightly better than expected June quarter and raised September's y/y revenue growth target to 20%, up from the Street's previous expectation of 15%. Most importantly, Zuckerberg presented the company’s most compelling vision of how and when AI will transform the business. The bottom line is Meta remains one of the best positioned companies to benefit from AI over the next 3-5 years.

Shares of Meta traded down 11% on the March quarter guidance that the company is entering into a multi-year investment cycle starting with AI capex in 2024 tracking to be 12% higher than previous expectations. We believe investors are missing the point. Meta has a golden opportunity in the next decade to leverage its data and build AI tools and products for billions of users, advertisers, and businesses.

Deepwater’s first annual Frontier Tech Survey measures the American public’s viewpoint on emerging technologies, including AI, Electrification & Automation, the Creator Economy, and Health-Tech. Key Takeaways: AI – General usage and awareness remains low; opinions are mixed when it comes…

It's official, the world of spatial computing has begun with the launch of Vision Pro. The reviews have been consistent: groundbreaking tech with limited use cases. On launch day, the platform has over 600 apps available, already more than the 574 apps built over the past three years for Meta Quest. Importantly, Vision Pro's developer momentum is pointed in the right direction with about 60% of those apps outside of gaming, compared to about 30% on the Quest platform. Apple's goal is to motivate developers to ensure Vision Pro goes beyond gaming to make the device mainstream.

Over the last seven years, we’ve made a habit of offering a few predictions for the year ahead. Here’s what we’re anticipating for 2024: IWO will outperform the S&P500. The iShares Russell 2000 Growth ETF (IWO) will outperform the SPDR…

WSJ reported that Meta is considering offering paid versions of Facebook and Instagram to European users in an effort to navigate EU privacy regulations. We think there is 25% chance that this comes to fruition. If it does, we estimate it would add between 2-10% to overall revenue for European availability and 3-15% if available in US and Europe.

Meta's annual developer conference, Connect, highlighted that it shares the same vision with Apple when it comes to the potential of a new headset-computing paradigm, even if its flagship headset is light years behind (though priced far lower). Separately, Meta announced new AI products that will capture meaningful user attention.

Meta's year of efficiency over, and it’s now about years of more efficient growth. The company's cost cutting is done, and the ad market has stabilized. Meta is shifting its focus to investing in AI and the metaverse, funded by a solid core business and DAU's that are growing 4% y/y, ahead of last years 3% pace. All of this should yield earnings growing faster than expenses through 2024. Deepwater is invested in META.

   

The year of efficiency is already working as evidenced by March revenue exceeding estimates by 2% and EPS by 9%. The efficiency page will turn, and investors will soon be thinking about 2024, when the company’s opportunity in AI will be anchored by its current impressive DAU growth. That combo should start a flywheel of AI driving engagement and ultimately increasing revenue growth.