Meta Platforms, Inc. (META) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. Welcome to our Thursday afternoon keynote discussion with Dave Wehner, the CFO of Meta. Dave, I'm going to -- I've been looking over everyone. I've been looking at you. It's great to see you. Thanks for joining us. Can you hear me okay? Maybe not. Wait for sound. do you have to unmute.

Sound check.

Check. Hey, Dave, how you doing?

Good.

Good to see you. It's been a very eventful period around -- for Meta in the overall online advertising ecosystem. There's always a lot of things to talk about. So we really appreciate you taking the time and sit down with us for a little bit.

Yes. Thanks, Brian. I appreciate to get the chance to be here with everyone and speak with you all.

Great. Let me start with the disclosures, one last time. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures, or they're also available at the registration desk. Some of the statements made today by Meta may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of today, and Meta undertakes no obligation to update them. Please refer to Meta's Form 10-K for a discussion of the risk factors that may impact actual results. Didn't stutter once the entire week. Not bad. Okay. Dave, it's good to sit down. I want to, sort of, start with a few broader topical questions. There's always a lot of things going on with the business. Maybe just a big picture. Talk to us about some of your views on some of the major challenges for Meta that you're sort of navigating through in 2022, as well as some of the opportunities that you think are important for investors to really understand in the 2022, 2023 framework.

Yes. Thanks, Brian, and great job with those disclosures. I think, the best way to frame this is, like you said, we're -- we've got a set of near-term headwinds. But at the same time, we think we've got some great long-term opportunities. So why don't I just start with what I see as being the headwinds. First, there's been a lot of noise with COVID, both in terms of engagement and revenue trends. It's clear that we're coming off a very positive environment for e-commerce that we have had during COVID, and we have been seeing softness in that vertical more recently. And e-commerce has been our largest vertical. So in the U.S., it looks like we have reverted back to the pre-COVID trend line, in terms of gradual increase that we've seen in e-commerce as a percentage of total retail. So that big surge that we saw, when the COVID lockdowns went into place, has pulled back to the trend, as life has returned to normal. And it was that e-commerce softness that was really notable, as we went through the end of Q4. And in addition, probably to the shift in balance between online and offline, there's likely supply chain and other issues that contributed to that softness. And then secondly, and I'm sure we'll undoubtedly get into this later, beginning in the second half of last year, we began facing strong headwinds due to the Apple ATT changes with the rollout of iOS 14. And then finally, we've been seeing the rise in short-form video, and our biggest growth opportunity, right now, is Reels, which is, though it's a great growth opportunity for us, is negative on ad impression and revenue growth in the near term. So those are really the 3 big headwinds for revenue. And then the opportunities that we have, mirrors those to some extent. We expect that as -- that we'll start to see the sort of post-COVID period normalize, and we'll get back to the secular trend of e-commerce growth as a share of retail. By the second half of the year, we'll begin -- we'll be lapping the Apple ATT changes. And at the same time, we expect to continue to improve the targeting and measurement in the new environment. And then, longer term, on the advertising front, we see an opportunity to utilize more artificial intelligence and machine learning to optimize ads, using less data. And then there's Reels, that's a headwind today, but we think longer term, it can be a big opportunity for us. The short-form video opportunity is -- it's very large. It's very monetizable. So we think that will shift from being a headwind on impression growth in 2022 to being a tailwind, as we start to put more ads into Reels, going forward.

Okay. That's helpful. I want to -- I do want to drill into all of those topics in more detail. But the other macro topic I wanted to talk to you a little bit more about is Russia, Ukraine and just Europe as a whole. Maybe just -- can you, sort of, help us understand a little bit how to think about your European exposure and any impacts from a user, advertiser or consumer spend perspective, we should think about that could impact Meta?

Yes. Look, of course, the situation is just tragic, the events unfolding in Ukraine. And so our thoughts are with everyone affected by the war, especially those in country. Before touching on the business impact, because I think that's important, let me at least hit on what we're doing more broadly with regards to the conflict. We've established a special operations center that's staffed by experts from across the company, and we're taking extensive steps across our apps to keep people in Ukraine safe. That's enforcing our policies. It's reducing the spread of misinformation. And then we're also continuing to roll out privacy and security measures to help keep people in Ukraine safe and protect their accounts from being targeted. Now, you specifically asked about the impact to our business. So I wanted to get a few thoughts there. The Russian government announced that they're blocking Facebook, and we are working to try and keep our services available to the greatest extent possible, but we are seeing the blocking have an impact. And then also, just due to the difficulties of operating in Russia at this time, consistent with what we've seen many others in the industry and across industries do, we're no longer accepting ads from Russian advertisers or for Russian users. And to give a sense of the magnitude on that, in 2021, those categories accounted for about 1.5% of advertising revenue. So it will have an impact in 2022. And then, not surprisingly, more broadly than just the Russia exposure, we're also experiencing some softness in Europe beyond that as well, due to the conflict. It's hard to say whether that is temporary or will persist. But this is another challenge that we hope will be a short-term headwind to the business. And certainly, we hope the situation gets resolved peacefully sooner rather than later.

Okay. That's helpful. And the part you called out on Europe, that's on the advertising side, the user side or both?

Advertiser side.

Okay. Great. Okay. That's very helpful. Let me go back to the first question, then, about sort of the headwinds and the opportunities that you spoke about, as we think about 2022 and 2023. Let's start with IDFA, ATT and, sort of, some of the App Store changes. There's a lot of moving pieces here. We've been discussing this for, boy, well over a year. You've been making a lot of adjustments to the advertising product, to the targeting, to the measurement, et cetera. Talk to us about where have you made the most progress on, sort of, trying to improve measurement and attribution for your advertisers through this. And then, what areas are taking longer than you expected, where you hope to make more headwinds throughout 2022?

Yes. No, it's certainly something we've been talking about, and we've seen this coming. First and foremost, we believe personalized ads are better for people and businesses. So we've seen the impact from the Apple's changes negatively impact our advertisers by developers and that people use our services who get less personalized and less relevant ads. Historically, we've done a great job of optimizing our advertising tools to leverage third-party data, and we're clearly best-in-class at that. And as a result, we were more impacted by Apple's changes. I just think it's important to note, it's not because we were moving slower or not successful at getting advertisers to adopt our new solutions. In fact, I think we were out in front of these changes before our peers. So the reason we've had a big impact is simply because we're better than our peers with targeting and measurement. In the new environment, we're working to improve measurement and targeting, and we're taking a multipronged approach. On the measurement side, our ability to use off-site conversion data at the user level is what's impacted by the Apple changes. So as a result, we've had to pivot, helping businesses measure their campaign results by using aggregated data through tools like Aggregated Events Measurement. And we expect to continue to make progress on measurement over time through ongoing technical improvements to AEM. And then there's targeting. Now, our systems can optimize the targeting, based on the predictive conversions. So anything really that impacts measurement, is also going to have an impact on targeting. And that means as we make improvements in measurement, those will flow through to targeting as well. And the big impact because of the changes is on off-site conversions, and we've seen the impact be on verticals that more heavily used those objectives like e-commerce and gaming. And in addition to improving Aggregated Events Measurement for those off-site conversions, we're also working to drive more on-site objectives for our advertisers. A good example of that is our click-to-messaging ads format. That, today, we already have a multibillion-dollar ads business that's growing at healthy double-digit growth rates. Shops is another example of that, where we're moving to get the conversion to happen on site for our e-commerce clients. So there's a lot that we're doing to make improvements here.

Got it. Okay. And you were pretty clear, when you talked about fiscal 2022, at earnings, talking about [ an expected ] $10 billion impact to 2022 revenue from the Apple changes. Just to sort of to level set for everyone, does that headwind assume you're able to make more incremental progress from where you were in the fourth quarter? Or is that $10 billion more of, sort of, status quo? And then if any improvements, it could be smaller than that?

Yes. I mean, look, we are -- we're clearly -- got a large headwind. We think we're executing well in the face of that. And we've been, kind of, calling out these headwinds for a while. And there hasn't really been a real change in our outlook on the magnitude of those headwinds in 2022. If Apple had not made the ATT changes, 2022 revenue would be approximately $10 billion higher. Now, this does assume some incremental impact from iOS 15. That's smaller, in terms of impact, than -- significantly smaller, in terms of impact, versus iOS 14. And it does take into account making incremental improvements. And obviously, this impact doesn't just hurt us. It hurts the whole ecosystem and advertisers, specifically. And I think it's worth noting that it is $10 billion in aggregate. That's not just the incremental impact in 2022. In the second half of 2021, revenue would have been correspondingly higher as well, certainly to the tune of several billion dollars. And I think there hasn't -- I think there was a little bit of a -- probably because we talked about the $10 billion. I think there was some misunderstanding that the magnitude of the headwind outlook had changed substantially. It really hadn't. One of the bigger factor, really, in, sort of, Q1 guidance was the demand softness we're seeing in verticals like e-commerce. So that's something that I would just note. In terms of what we're doing, I mean, certainly just by the fact that we're comparing to periods right now in the first half, where we didn't have iOS 14 rolled out last year, our comparisons are tougher in the first half. And then they'll get easier as the year progresses. We've got a multipronged strategy to help mitigate those headwinds, and in the near term, we're continuing to make improvements on AEM that I talked about. Over the medium term, we're -- we see opportunities to move clients more towards on-site conversions such as click-to-messaging ads, ads and Shop ads. And then over the longer term, we're working to rebuild our ad stack and employ machine learning and AI to be more effective at ads with less data. And so we're optimistic that over the long term, we can improve what we can do in the new ads environment, but some of the work is going to take time to play out.

Okay. That's helpful. Let's talk about Reels. There's been a few investor discussions about Reels, as you can imagine, Dave. You spoke a lot about the real transition on the fourth quarter conference call and even throughout last year. Mark has talked about how Reels is a priority for 2022. . Our latest AlphaWise survey data, for what it's worth, they show pretty strong Reels adoption. We think 62% of U.S. monthly active users are engaging with them, up from 53% earlier in '21, pretty rapid growth, we think. So the questions are: one, what is your reaction to that type of implied adoption, high, low or no comment? And then three, as you are monitoring all the Reels adoption trends, what can you tell us about evidence that the Reels time spent is proving to be incremental as opposed to just substitute it from other use cases on the platform.

Yes. I mean, look, we believe the Reels and short-form video provides a big opportunity for time-spent growth across our Family of Apps and others, incrementally making the opportunity bigger for us. So we do think there are Reels incremental growth opportunities here. . I think one of the best way to, sort of, frame, kind of, looking through COVID and all of that, is that video and short-form, both on our platform and obviously with others, has taken the bulk of the growth in the mobile app ecosystem over the last couple of years. And we think we're well positioned now to participate in that growth, going forward. And so with Instagram Reels, we think we already have a strong position in the short -- in short-form. Obviously, we're well behind TikTok. In India, where they're not operating, we're clearly much bigger. For context, Reels is our fastest-growing format. It's growing faster than Stories at a comparable time in 2018. We think that the market for short-form is large enough that there will be an opportunity for multiple players. And while it's a headwind for impression and revenue growth, as we ramp in 2022, longer term, we think it's going to be a tailwind. We're -- now, we're pulling time away from other services, but adding to overall engagement. So it is incremental. Longer term, we think the big picture is, the opportunity for Family of Apps is bigger with short-form as part of it. And then, in addition to the success that we're having with Reels on Instagram, last month, we launched Reels globally on Facebook in over 150 countries. It's much earlier days on Facebook, but we're excited about the early engagement there as well.

Okay. The other side of the Reels equation is the creator side. So give us some examples of the types of investments or innovation that you are focused on, sort of, philosophically, to compete for creators. We recently wrote, there could be a 55% rev share situation with Reels. Like how do you guys think about competing for creators in this highly competitive space?

Yes. Look, we see a lot of opportunities to continue to grow Reels on both Instagram and Facebook. And what we're working on is 3 areas. It's creators, absolutely, we need to work to simplify the creation flow and adding new editing tools, improving discovery. We're investing in recommendations and ranking, leveraging AI and ML, so that we can improve our ability to show people Reels that they will find engaging. And we're putting Reels into Feed to help people discover Reels and grow familiarity with the product. On the creator monetization front, we recently announced our Reels Play bonus program, which is part of the $1 billion creator investment. And we're also building direct monetization options through ad rev share on some formats, though we don't think that's going to be the bulk of it. So we think we've got a lot of opportunities. And we think we're coming from a differentiated place. We've got a few areas where we think we can differentiate. The first is just allowing our users to discover and engage with Reels in Feed. That's powerful. It just allows not only users to discover this format but also gives us more time with it and more experience with it. And then, the second is just an ability for people to share Reels experiences with their friends, using our Graph and -- whether that's through Facebook, Instagram, our messaging products. And then finally, we think, long term, our ability to monetize Reels to be able to share that with that value creation back to creators, is going to be helpful as well.

Okay. We all -- you certainly remember 2018 and the Stories transition in spring of 2019, sitting here, talking about that. It sort of seems, from my perspective, like there are a lot of similarities between Reels -- the Reels transition and the Stories transition. You've built these engagement and monetization muscles up before. It's a very similar playbook. . The only thing that seems to be different is you do have a competitor out there. This time, it was large. So my question is, as you sort of sit in your seat, do you see any other notable differences between this transition and the Stories transition? And how does that difference in the competitive environment play a role in how you address both Reels engagement and monetization pace?

Yes. Look, this isn't -- I agree. It's not the first transition. I'd even go back to the web-to-mobile transition around the IPO. There were concerns that we would never be able to successfully monetize mobile the same way we had with the web. And that ended up being -- mobile Feed ads ended up being a phenomenal business for us. And similarly in 2018, when we were really focused on Stories, there were concerns about whether we should be pushing users into an experience that we weren't yet good at monetizing. And look, Snap was obviously and is a strong competitor in formats like Stories. And when we were working with Stories, we're initially focused on building a great experience rather than monetization. And in the early days, Stories' monetization was nowhere near what we saw in Feed. And the concern, again, was that we could never close that gap. But now in places like the U.S., the Stories format is monetizing much closer to parity. We see it on a per minute basis, and we hope to run a similar playbook with Reels. And we believe that short-form is ultimately a format that works well with our Feed and Stories ads business, so I'm pretty optimistic about the long-term potential here. And it's certainly much better for us if short form, as video, is dominant versus long-form. It just works better with our advertising model. There's more natural opportunities to show out between videos. At the same time, we do have formidable competition. We've had it -- we had it with Snap in Stories, and TikTok is large and growing. And we're playing catch-up there. But we think we've got a fantastic offering with Reels, and we're excited about continuing to grow user engagement there.

You're very much in the numbers and, sort of, aware of the way these different services monetize. It's great to hear that Stories and Feed are getting close to parity. . As you sort of think about the Reels form factor, are there any reasons why, when you look at it, it couldn't, long term, monetize at similar levels to Stories or News Feed?

We think there are a lot of similarities between Stories monetization and Reels. And we know the playbook. And like I mentioned, we've gotten to similar levels for Stories and Feed. But every format is a little bit different, and it brings its own unique characteristics and challenges and opportunities. . Reels are all video and while stories are not. So Reels also is slightly longer videos. So while I'm optimistic about Reels, we haven't scaled out there yet, and we'll take experimenting to understand where we will ultimately get to. And then we talked a little bit -- you mentioned earlier, kind of, rev share and how that plays into it and the overall opportunity. And we want Reels to be a place, where creators can make money and build businesses. And we've got our $1 billion Creator Fund. We're experimenting with some revenue share models on some formats. But at least in the near term, we don't think revenue share will be the predominant model. Look, at the end of the day, I think we've got a great offering, from a consumer perspective, with Reels. We think it will be a good format for advertisers. It's still early days, but we're confident that we can monetize it well over time.

Very helpful. As the guy who put a 55% rev share in the back half of the year, that is good to know, helpful to know. Okay. Let's talk about big blue, core Facebook, which we still think is about 60% of the overall revenue. There's some investor concern that there's weakness or perceived weakness in core Facebook engagement and time spent. Can you give us some color on what you're seeing in North America and the rest of the world on big blue core Facebook users, time spend, engagement, however you look at it?

Yes, sure. Look, the good news is, a lot of people around the world are on Facebook, and they find a lot of value on the platform. In North America, we've been saying for quite a while, we're at a point of more maturity for Blue. We expect user levels to bounce around from quarter-to-quarter, and that's what we've seen in terms of DAU. . In Asia and rest of world, we continue to have growth opportunities, but we're also seeing higher penetration levels in some countries, and that makes our reported metrics more susceptible to external factors like COVID. So Facebook user growth was impacted by a number of headwinds in Q4, in those regions. Some growth was pulled forward by COVID into prior quarters, with markets like India and Lat Am, where there were some COVID resurgences earlier in 2021 that waned in Q4. And then India, in particular, had a specific headwind with increased costs from beta plans that also impacted user growth in the fourth quarter. It's just worth noting that COVID has, over the last 2 years, made it hard to parse all of the trends, given the surge of engagement we had during lockdowns. But, kind of, at the 10,000-foot level, in terms of overall engagements, we're basically where we were, pre-COVID, in the U.S., and we're a bit higher internationally. So on top of the, kind of, huge rise of short-form video engagement, it's stable and a bit up on a year-over-2-year basis. If you, kind of, dive into those numbers, we have seen our engagement shift more towards video and short-form, and that's clearly been a big part of the growth in the past couple of years, across the entire ecosystem. And we believe it will be a big part of the growth opportunity in the next two, and that's why we're laser-focused on Reels and why we've been talking about it so much, so far. It's a growth opportunity for engagement and we think in the long-run revenue.

Is that transition -- I know, on the last conference call, you talked about how North America impression growth was down 6% year-over-year. Is that why that's happening? And, sort of, as you think about the guide for the first quarter and the rest of the year, how are you thinking about North America impression growth?

Yes. We think the impression metrics are useful for understanding the trends. And it tells you about the number of ad spots we're selling. So it's a good measure of volume across the ecosystem. And North American impressions were down 6% in Q4. There's a number of factors that are driving that. It's kind of linked to the stories we've been talking about, already. There's the general COVID lockdown effect. There's the shift to video. And as we shift to Reels, people are just spending more time on services with fewer impressions, so that's a negative for impression growth. And then we're seeing competitive pressure on time spent from the -- from others. As we go forward, we're hopeful that the COVID issue will become less of a factor. I think all of us are ], if that's the case. And then in 2022, we will continue to see impression-growth headwind from ramping Reels. But at some point, as we ramp out in Reels, we'll see that flip to being a tailwind.

Got it. Okay. We talked a little bit about IDFA, but really bigger picture between IDFA, CCPA, GDPR, AAID, other changes were just really putting in a nice pile of acronyms that are all impacting data and the amount of data you get access to, et cetera. Now, you've spoken to already today, and you've spoken in the past about rebuilding a lot of the tech stack at Meta. We see it in the OpEx. We have $90 billion of OpEx, [ $29 billion ] of CapEx this year. About how much of that spend is related to rebuilding the underlying stack of the company? And what are sort of 1 or 2 of the most important rebuilds that you're either working on have rolled out or you look to really improve in the tech stack?

Yes. Well, I can probably throw a few acronyms back at you. So look, in the near term, we're using AEM, that's Aggregated Events Measurement, to help aggregate and [ anonymize ] data, and that's going to be important. It's rolled out, getting better at that, as the year progresses, and is an important effort. In the medium term, we're moving clients more towards first-party ads and on-site conversion. So that's click-to-messaging, it's Shops, lead gen. Longer term, we're building our ad stack around AI and ML, to throw some acronyms out, using less data. And look, we're optimistic. There's a lot of different priorities we're funding with that -- with the OpEx and CapEx investment. But certainly, on the CapEx side, the majority of it is spent towards things like optimizing, ranking for engagement and for ads. So that's a big part of it. And AI and machine learning are becoming an increasing part of the CapEx investment that we're making and getting better at doing -- better targeting and measurement with less data is a big effort of the AI and ML teams.

Okay. And that all impacts the core Family of Apps margins, which have been sort of 40% to 50% over the last 3 years. As you're going through all the investment and rebuilding the ad tech stack, are there any other puts and takes that we should think through as sources of margin pressure or margin alleviation in that Family of Apps segment, going forward?

Yes. I mean, look, we see business growth opportunities over different time periods, and we're investing a lot this year to take advantage of those. The bulk of that investment on the OpEx and total expense sides is going to Family of Apps. And virtually, all the CapEx is going to Family of Apps. When you think about our expense outlook, there's -- it's pretty straightforward. There's two big factors. There's people, and there's capital investment in our data center, and that flows through to depreciation. On -- in 2022, we're accelerating headcount growth, and that's going to be the biggest contributor of expense growth. That's largely in tech and product roles to support the 7 priorities that Mark laid out in the earnings call. So that's Reels. It's community messaging. It's commerce. It's ads. It's privacy, it's AI, and then it's the metaverse and Reality Labs work that we're doing. In addition to the higher expenses, we're going to see depreciation flow-through from the CapEx investment and the infrastructure build. But when you take all that into account, we think Family of Apps can sustain a healthy margin business over time. At the same time, as we talked about, we are investing a lot this year, and we do expect revenue in 2022 to grow more slowly than expenses. So our operating margin will be lower than it was in 2021, and that will be true, overall, and in the Family of Apps segment as well. As we look beyond 2022, not providing guidance, but the margin is going to depend heavily on our success in driving the top line and that's having success in Reels. It's translating our investments on -- in AI and machine learning, into better revenue and engagement growth, and it's building more on-site activity in areas like messaging and Shops. And even to the extent that we can drive good results with these investments, we'll be pushing them harder. And to the extent that we're less successful on those, we can moderate them over time.

Let's talk about Shops. Shops was first introduced about 1.5 years ago. We've done a lot of work about Shops. You and I have spoken a lot about Shops over that period. . Maybe a two-parter for you, one, as you sort of look over the last 18 months, where you made the most progress in building out Shops? And then going forward, what is sort of the biggest challenge to really scaling Shops for both merchants and for users to drive just more GMV and advertising on the platform?

Yes. Look, we're pleased with the progress we've made in Shops and commerce tools over the past quarter. Shops are one part of the overall focus to drive more on-site activity, so driving more on-site conversions. Messaging is another part of that story as well. In Shops, there's a few key areas that we're focused on. We want to continue to be the best place to advertise. A lot of commerce activity already happens as a result of our platform. As I mentioned, e-commerce is our largest ad vertical. It drives hundreds of billions of dollars of off-site e-commerce volume. Moving that on site, we think, will be better for our advertisers in many cases. But we need to make it easier for businesses to sell on our platform. And so one of the things we're doing is investing a lot in partner integrations to bring that web inventory on site at scale. We've launched Shops in a number of places in Facebook and IG and in Marketplace. And we're helping businesses personalize the shopping journey with our Shop ads solution. So we're doing a lot on the client front, on the business front to try and make it easier to bring those experiences on site. And then in terms of the consumer experience, we're encouraging people to shop and transact more on the platform. And that's about building innovative new formats that let people shop from creators and brands that they love, and that's formats like live shopping and [ drops ].

Got it. Okay. Maybe next year, we could have our avatars on the screen to be hanging out in the metaverse. But -- let's turn to Quest and the metaverse a little bit, very strong holiday season, both from a hardware perspective, and you talked about how you've had people spent more than $1 billion in the Quest store now. It's early. We know that. But one of the questions I often -- I get from investors is, how do they burn $10 [ billion ] on that line item? So maybe talk to us, sort of, qualitatively to, sort of, think about what are the actual investments that you're making on Quest and the metaverse, everything else? How are you, sort of, deploying the capital to, sort of, move toward Mark's long-term vision?

Yes. Sure. I understand the issue and it's -- look, with the metaverse, we view this as the progression of the online social experience. It's to a more immersive and interconnected, embodied experience. . But this is a massive investment to build a whole new paradigm of computing and online activity. And you're really only seeing one element of that today, with our existing products and the investments that we're making, with the Quest 2 VR headset. And there's a lot we're doing to make Quest 2 successful. So we're investing on the R&D side. There's the cost of the systems themselves. There's the shipping. There's the fulfillment. There's the sales and marketing, and we're making a big investment in Quest 2 content as well. So we're doing a lot to support Quest. But the bigger area of investment is the next-generation technology in areas like AR glasses. That requires just a massive amount of foundational work across the entire tech stack. And that means ongoing efforts across research, experimental development and production. With AR, the problem is really significant. We need to fit a supercomputer into normal-looking glasses. We have to set custom lenses, displays, batteries, custom silicon. There's just lots of different elements of the supply chain that we also need to fit in a form factor that's comfortable to wear all day. So this is -- these components don't exist today, and we're really having to work across the supply chain to get us to a point where we can deliver a complete package. And then on top of the hardware, we need software and interfaces and experiences that will deliver the whole experience we want for the metaverse. So it's a significant undertaking across multiple different product lines and hardware and software.

Play onward through your current glasses, one day, perhaps. The -- so I know there's potentially another headset coming later this year. Are there any other key milestones or comments that Mark has made or that you all have made about critical metaverse moments, this year, that we should all be focused on and sort of paying attention to understand where -- how it's going to evolve?

I mean we're continuing to -- obviously, we're continuing to build more content and experiences around the Quest 2 platform. I think we're going to learn a lot, in terms of experiences in software, and we're working on a bunch of exciting stuff there. We built an avatar platform, getting digital identity. We launched that. We'll be continuing to enhance that as the year progresses. In terms of experiences, we launched Horizon Worlds, focused on user-generated content, built entirely in VR. We reached 300,000 users in the first 3 months, small, but what's exciting is it's -- we're learning, we're growing, we're experimenting. And then, we're continuing to build the underlying software platform related to creator tools, asset line, various digital objects. So the I think there's just a lot of work that's being done. And I think some of that will -- we'll at least see how the experiments are going on that front and certainly be updating investors as that progresses.

Let's talk about share repurchases a bit. This past quarter, in the fourth quarter, you bought back $19 billion of stock. I think -- so a two-part question here. One, just sort of walk us through the rationale for those buybacks in the fourth quarter, even into December per the 10-K. And then just sort of bigger picture, philosophically, how are you thinking about capital returns and repurchases to come?

I don't think there's a big change in our priorities. The priority is investing in growth, and it's -- it was the ones that we've discussed so far. It's making sure Reels is successful. It's investing in AI and machine learning on the ad side, continuing to invest in developing the metaverse. And that's going to involve a healthy amount of OpEx and CapEx, but we think that the core Family of Apps business will provide adequate capital to fund those investments, and that also allow us to continue to repurchase stock. And we think we can offset the employee dilution, but also continue to make anti-dilutive repurchases, opportunistically. And we do all of our repurchases under a plan, and that's what we execute on.

Last one I had is actually on -- it's on CapEx. I think you mentioned part of this before, but for this current year and the CapEx guide, can you give us a little more granularity of the CapEx breakdown between core Family of Apps and Reality Labs? And then, as you sort of think ahead to CapEx and capital intensity, talk to us about the capital intensity you anticipate for Reality Labs over the long term.

Yes. Look, in 2022, we have planned CapEx, $29 billion to $34 billion, and that's driven by continued investment in the infrastructure. So it's data centers. It's servers. It's network infrastructure. And we're investing ahead of future growth that we want to make sure we've got adequate capacity to ensure that we can continue to support the growth that we expect. The investment is almost entirely to support the Family of Apps side of the business. Reality Labs really, today, doesn't consume a meaningful portion of our infrastructure capacity. The scale of engagement is just well below that of the Family of Apps. And where we're investing on the Family of Apps side, is not only in just kind of core capacity but also a long-term investment in AI and machine learning to improve ad targeting and ranking and recommendations. So that's really kind of what is leading to the kind of the incremental investment that we're seeing there. We haven't shared an outlook beyond 2022. Obviously, we're making this big investment in AI and machine learning. If that pays off, we'll clearly want to invest more. But if it does, that should translate into higher engagement and revenue. So it's clearly an opportunity for us to invest. We think it's a good one, and we think it will improve the business, overall.

All right. Well, Dave, thank you. Thanks for joining us. We will stay on top of all of the progression going on at Meta throughout the course of the year. We will have a chair for you here next year. We'll see you live, and thank you again, Dave.

Yes. Thanks, Brian. Thanks for having me.

Thank you.