Meta Platforms, Inc. (NASDAQ:META) Q3 2023 Earnings Call Transcript

Meta Platforms, Inc. (NASDAQ:META) Q3 2023 Earnings Call Transcript October 25, 2023

Meta Platforms, Inc. beats earnings expectations. Reported EPS is $4.39, expectations were $3.62.

Operator: Good afternoon. My name is Dave and I will be your conference operator today. At this time, I would like to welcome everyone to the Meta Third 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. [Operator Instructions] This call will be recorded. Thank you very much. Ken Dorell, Meta’s Director of Investor Relations, you may begin.

Ken Dorell: Thank you. Good afternoon and welcome to Meta Platforms’ third quarter 2023 earnings conference call. Joining me today to discuss our results are Mark Zuckerberg, CEO, and Susan Li, CFO. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in today’s press release and in our quarterly report on Form 10-Q filed with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.

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 press release and an accompanying investor presentation are available on our website at investor.fb.com. And now, I’d like to turn the call over to Mark.

Mark Zuckerberg: All right. Thanks, Ken. Thanks, everyone, for joining today. This was a good quarter for our community and our business. We estimate that there are now more than 3.9 billion people who use at least one of our apps every month. The big product news this quarter is that we just held our annual Connect conference and we discussed Quest 3, which is the first mainstream mixed reality device, and the next generation of Ray-Ban Meta smart glasses, which are the first smart glasses with our Meta AI built in. There continues to be a ton of innovation in AI. And we used Connect to describe and start launching a lot of the new consumer AI experiences that we expect to become meaningful parts of all of our apps and our business over the coming years.

We started rolling out Meta AI, our new assistant that you can access across all our messaging experiences and smart glasses to answer questions, get access to real-time information, and generate photorealistic images. We started launching our AI Studio platform that enables people to create and interact with lots of different AIs for help getting things done and just having fun. We rolled out Emu, our image creation model that produces high quality images and stickers fast. We launched an early alpha of business AIs so that eventually every business can have an AI to interface with customers to do sales and support. And we let out the plan to launch creator AIs next year, so every creator can have an AI their fans can engage with to help them build out their community.

And that’s just a snapshot of some of the AI work that we’re doing. The experiences that we start rolling out at Connect are going to transform the way that people use all our services, feeds, messaging, hardware, advertising, business messaging, interacting with creators and more. But it’s going to take time to tune all these experiences before hundreds of millions or billions of people are going to use them. And I expect that dialing in these products and the vision that we articulated at Connect is going to be our theme for much of the next year. And I think that it’s going to be a very exciting 2024. As we are looking ahead and planning for next year, I want to share a few thoughts on what I’m expecting. I’ve been happy with our results this year so far, and we are planning to continue focusing on operating efficiently going forward, both because it creates a more disciplined and lean culture and also because it provides stability to see our long-term initiatives through in a very volatile world.

Now, in terms of investment priorities, AI will be our biggest investment area in 2024, both in engineering and compute resources. But I want to avoid allocating a lot of new headcount. So we’re going to continue deprioritizing a number of non-AI projects across the company to shift people towards working with AI instead. On the recruiting front, one dynamic that I want to flag is that we have a sizable hiring backlog right now since part of our layoffs earlier this year included teams swapping out certain skill sets for being able to hire others. And we’re still going to be hiring those roles into 2024. So that means that even though we’re going — even though we’re planning to grow headcount at a much slower rate going forward, the actual rate next year may temporarily be faster as we work through this hiring backlog.

All right. Now, let’s get into our product updates. Let’s start with Reels, which continues to do very well. We estimate that with all the ranking and product improvements that we’ve made, Reels has now driven more than 40% increase in time spent on Instagram since launch. We also reached a monetization milestone earlier than expected. And we estimate that Reels is now net neutral to overall company ad revenue. In many ways, Reels has now graduated from being an early initiative to now being a core part of our apps. So going forward, and we’re going to continue focusing on Reels, but we’ll also look at growing it as part of our overall portfolio of video services, which make up more than half of the time that is spent on Facebook and Instagram.

And There’s a lot more to do across all of these. All right, AI. AI advances are driving a lot of our product and business performance. Generative AI will increasingly be important going forward. I outlined our product roadmap earlier. And on top of that, we’re also building foundation models like Llama 2, which we believe is now the leading open source model with more than 30 million Llama downloads last month. Beyond that, there was also a different set of sophisticated recommendation AI systems that powers our feeds, Reels, ads, and integrity systems. And this technology has less hype right now than generative AI, but it is also very important in improving very quickly. AI-driven feed recommendations continue to grow their impact on incremental engagement.

This year alone, we’ve seen a 7% increase in time spent on Facebook and a 6% increase on Instagram as a result of recommendation improvements. Our AI tools for advertisers are also driving results with Advantage+ shopping campaigns, reaching a $10 billion run rate and more than half of our advertisers using our Advantage+ creative tools to optimize images and text in their ads creative. Business messaging also continues to grow across our services and I believe will be the next major pillar of our business. There are more than 600 million conversations between people and businesses every day on our platforms. To give you a sense of what this could look like when it’s scaled globally, every week now, more than 60% of people on WhatsApp in India message a business app account.

A revenue from click to message ads in India has doubled year-over-year. Now I think that this is going to be a really big opportunity for new business AIs that I talked about earlier that we hope will enable any business to easily set up an AI that people can message to help with commerce and support. Today, most commerce and messaging is in countries where the cost of labor is low enough that it makes sense for businesses to have people corresponding with customers over text. And in those countries like Thailand or Vietnam, there’s a huge amount of commerce that happens in this way. But in lots of parts of the world, the cost of labor is too expensive for this to be viable. But with business AIs, we have the opportunity to bring down that cost and expand commerce and messaging into larger economies across the world.

So making business AIs work for more businesses is going to be an important focus for us into 2024. I want to give a quick update on Threads. We’re three months in now, and I’m very happy with the trajectory. There are just under 100 million monthly actives at this point. And we’re now getting to the point where we’re going to be focusing on growing the community further. From what we can tell, people love it so far. I’ve thought for a long time that there should be a billion person public conversations app that is a bit more positive. And I think that if we keep at this for a few more years, then I think we have a good chance of achieving our vision there. Now finally, in addition to AI, our other major long-term focus is the metaverse. And we just launched Quest 3, our most powerful headset yet, at a very competitive price.

We packed a lot of improvements in there, including a next generation chipset with 2x the graphics performance, our best display as yet, and a form factor that’s 40% thinner than Quest 2. But the most important breakthrough for Quest 3 is that it’s the first mainstream mixed reality device. And that means that when you put on the device, you see your physical room around you, and you can bring digital objects and games into your physical space, whether that’s a ping pong table, your workstation, a big screen TV to play Xbox games on, or your friends as holograms. The early reviews have been great, and it’s been fun to see how people respond to this. We also launched the next generation of Ray-Ban Meta smart glasses. They’re upgraded from the first generation in basically every way.

Better camera, clearer audio, they’re lighter, they have more styles, and you can now even live stream video from them. But most importantly, these are the first smart glasses shipping with Meta AI built in. So you can ask your glasses questions throughout the day. It’ll answer them right in your ear. And in many ways, glasses are the ideal form factor for an AI device because they enable your AI assistant to see what you see and hear what you hear. Again, it’s good to see the early reviews, they’re so positive, and I’m looking forward to this space evolving quickly over the coming years. We are also making progress on software for the metaverse too. Horizon is now growing faster. There’s more new worlds like Super Rumble and Citadel come online.

We also started testing Horizon for phones, tablets, and PCs, which is going to be an important part of how we build out the metaverse across devices. And we’ve had a couple of important milestones with avatars as well, both for our expressive avatars and the latest codec avatars that I showed off recently. Now, as I said at Connect, I think one of the most interesting questions for our industry over the coming decades is going to be how we bring together our physical and digital worlds into a coherent and good experience. I think we’re starting to see some of the building blocks come together between mixed reality for bringing digital objects into the physical world, our AI studio work for enabling interactions with all kinds of different AIs, and eventually smart glasses to bring all this together into a stylish form factor.

So I am very excited about the roadmap ahead. All right. That is my update for today. This was a good quarter. I’m pleased with our progress on efficiency this year. We’re a leaner organization, shipping faster and advancing the state-of-the-art in all of our long-term initiatives. And while investing heavily for the future, we also just recorded our highest operating margin in two years. So I’m looking forward to carrying this product momentum and operating discipline forward. As always, thank you to everyone on our team and all of you who are on this journey with us. And now, here’s Susan.

Susan Li: Thanks, Mark, and good afternoon, everyone. Let’s begin with our consolidated results. All comparisons are on a year-over-year basis unless otherwise noted. Q3 total revenue was $34.1 billion, up 23% or 21% on a constant currency basis. Q3 total expenses were $20.4 billion, down 7% compared to last year. In terms of the specific line items, cost of revenue increased 9%, as higher infrastructure-related costs were partially offset by lower content costs. R&D increased 1%, as higher headcount-related costs from Family of Apps and Reality Labs were partially offset by lower non-headcount related Reality Labs operating expenses. Marketing & Sales decreased 24%, due primarily to lower marketing spend and headcount-related costs.

G&A decreased 39%, due primarily to lower legal-related expenses. We ended the quarter with over 66,100 employees, down 7% from the second quarter. Our third quarter headcount no longer included the substantial majority of the employees impacted by the previously announced layoffs. Third quarter operating income was $13.7 billion, representing a 40% operating margin. Our tax rate for the quarter was 17%. Net income was $11.6 billion or $4.39 per share. Capital expenditures, including principal payments on finance leases, were $6.8 billion, driven by investments in servers, data centers and network infrastructure. Capital expenditures were below the prior year levels primarily due to lower server and data center construction spend as we prepared to shift to our new data center design, as well as payment timing.

Free cash flow was $13.6 billion, benefitting from a deferral of income taxes which was paid in the fourth quarter. We repurchased $3.7 billion of our Class A common stock in the third quarter and ended the quarter with $61.1 billion in cash and marketable securities and $18.4 billion in debt. Moving now to our segment results. I’ll begin with our Family of Apps segment. Our community across the Family of Apps continues to grow. We estimate that approximately 3.14 billion people used at least one of our Family of Apps on a daily basis in September, and that approximately 3.96 billion people used at least one on a monthly basis. Facebook continues to grow globally and engagement remains strong. Facebook daily active users were 2.09 billion, up 5% or 101 million compared to last year.

DAUs represented approximately 68% of the 3.05 billion monthly active users in September. MAUs grew by 91 million or 3% compared to last year. Q3 Total Family of Apps revenue was $33.9 billion, up 24% year-over-year. Q3 Family of Apps ad revenue was $33.6 billion, up 24% or 21% on a constant currency basis. Within ad revenue, the online commerce vertical was the largest contributor to year-over-year growth, followed by CPG and gaming. Online commerce and gaming benefited from strong spend among advertisers in China reaching customers in other markets. On a user geography basis, ad revenue growth was strongest in Rest of World and Europe at 36% and 35%, respectively, followed by Asia Pacific at 19% and North America at 17%. Foreign currency was a tailwind to advertising revenue growth in all international regions.

In Q3, the total number of ad impressions served across our services increased 31% and the average price per ad decreased 6%. Impression growth was mainly driven by Asia-Pacific and Rest of World. The year-over-year decline in pricing was driven by strong impression growth, especially from lower monetizing surfaces and regions. While overall pricing remains under pressure from these factors, we believe our ongoing improvements to ad targeting and measurement are continuing to drive improved results for advertisers. Family of Apps other revenue was $293 million in Q3, up 53%, driven by strong business messaging revenue growth from our WhatsApp Business Platform. We continue to direct the majority of our investments toward the development and operation of our Family of Apps.

In Q3, Family of Apps expenses were $16.4 billion, representing approximately 81% of our overall expenses. FoA expenses were down 9% as growth in infrastructure-related costs was more than offset by lower legal-related expenses, marketing, and headcount-related costs. Family of Apps operating income was $17.5 billion, representing a 52% operating margin. Within our Reality Labs segment, Q3 revenue was $210 million, down 26% due primarily to lower Quest 2 sales. Reality Labs expenses were $4.0 billion, flat year-over-year as higher headcount-related expenses were offset by lower non-headcount related operating expenses. Reality Labs operating loss was $3.7 billion. Turning now to the business outlook. There are two primary factors that drive our revenue performance.

Our ability to deliver engaging experiences for our community, and our effectiveness at monetizing that engagement over time. On the first, overall engagement on Facebook and Instagram remains strong. Reels, and video content more broadly, continues to grow and drive incremental engagement. AI- recommended content from unconnected accounts in Feed continues to become increasingly incremental to engagement, including in the US & Canada. These gains are being driven by improvements to our recommendation systems and we see additional opportunities to advance our systems even further in the future as we deploy more advanced models. We’re also developing entirely new experiences for our community. Our investments in AI capacity in recent years have enabled us to support leading Generative AI research and we’re meaningfully accelerating the pace of bringing that research into our products.

We launched our first consumer Gen AI experiences last month that are built on top of our foundation models and are excited to learn from how people use these tools to make them increasingly valuable over time. Aside from Generative AI, Threads also remains a compelling long-term opportunity and we’re excited to build on the strong product momentum we have going into next year. Turning to the second driver, improving monetization. Here, our focus is on continuing to drive marketing performance for businesses, including through business messaging. There are four areas of this work, improving Reels monetization; creating engaging on-platform ad experiences; making it easier for advertisers to connect their marketing data, and increasingly leveraging AI across our ads systems and products.

On Reels, we have continued to improve monetization and are now at a level where Reels is neutral to overall revenue. We’ve made tremendous progress over the last year building and scaling Reels as a consumer product, and it has now become part of the core experience on Instagram and Facebook. As such, we don’t anticipate quantifying the net revenue contribution from Reels going forward. We will still work to further improve Reels ads performance through ranking improvements and making Reels ads increasingly interactive, while also growing supply to give businesses more opportunities to get in front of people. We anticipate this ongoing work will help Reels be a modest tailwind to revenue in 2024 while we continue to strike the right balance between engagement and revenue growth.

But our focus going forward will be on growing revenue and engagement on overall video, and more holistically across our product lines within Instagram and Facebook. Next, onsite experiences. We’re seeing sustained momentum with Click-to-Message ads. Click-to-WhatsApp ad revenue continues to grow very quickly in particular and is already at a multi-billion dollar annual run-rate. We’re progressing on our work to enable further down the funnel conversions, and longer-term, we’re excited about the potential of AI to help businesses message with customers more efficiently at scale. We’ve recently started testing AI capabilities with a few partners and will take our time to get the experience right, but we believe this will be a big unlock for business messaging in the future.

We’re also excited about the potential for paid messaging, which serves as a nice complement to click-to-messaging ads by helping businesses develop ongoing relationships with customers once they’re in a messaging thread. Outside of business messaging, we’re seeing good early traction with Shops ads and in the third quarter we announced expanded commerce integrations with third party services to make it easier for businesses to set up a Facebook or Instagram Shop and run Shops ads. The third piece of our work is making it easier for advertisers to connect their marketing data. We’re investing in ways to make it easier for advertisers to adopt our Conversions API, understand its impact, and use it across a broader set of objectives. In addition to our existing support for AWS, in September, we announced the support of Google Cloud for the Conversions API Gateway.

We’ve also introduced enhanced reporting and rolled out Conversions API for Business Messaging so click-to-message advertisers can now better understand the value of WhatsApp and Messenger and improve their performance. Last, AI. We are leveraging AI across our ads systems and suite of products, which is driving improved performance for advertisers. We’re increasingly adopting the use of larger, more advanced ads models and using AI to power ads products that provide increased automation to advertisers. We’re seeing strong traction with our Advantage+ Shopping solution, particularly around online commerce and CPG advertisers looking to drive online sales. And we’re continuing to invest in several other products within our Meta Advantage+ suite to help advertisers optimize and automate more of their campaigns.

Before turning to our revenue outlook, I’d like to provide color on our hiring plans as we look to 2024. One important point to note is that we are currently operating with a significant underrun against our 2023 budgeted headcount. For much of late 2022 and early 2023, we had instituted a broad-based hiring freeze as we undertook our restructuring efforts. In addition, as part of those restructuring efforts, many teams elected to make deeper headcount reductions in order to hire different skill sets that they need. We have since resumed hiring but expect that much of our hiring that was originally planned for and budgeted in 2023 will occur in 2024. As part of our 2024 budget, we plan to selectively allocate incremental headcount toward four key company priorities, AI, infrastructure, Reality Labs, and monetization as well as toward our regulatory and compliance needs.

Of those areas, we expect AI to be the largest area of increased investment as we further invest in Generative AI across our core products, internal tooling, and research efforts. We aim to offset some of this growth by continuing our efficiency focus and reducing planned hiring in other areas across the company in 2024. The net effect of our efforts to close out our 2023 hiring underruns and our efficiency-focused 2024 budgeting process is that we expect to end next year with reported, in-seat headcount meaningfully higher than our current headcount, but to grow at a slower rate beyond that. We also expect a step-up in infrastructure-related expense growth next year as we recognize higher depreciation and operating costs from running an expanded infrastructure footprint.

In addition, we continue to monitor the active regulatory landscape, including the increasing legal and regulatory headwinds in the EU and the US that could significantly impact our business and our financial results. Of note, the FTC is seeking to substantially modify our existing consent order and impose additional restrictions on our ability to operate. We are contesting this matter, but if we are unsuccessful it would have an adverse impact on our business. Turning now to the revenue outlook. We expect fourth quarter 2023 total revenue to be in the range of $36.5 billion to $40 billion. Our guidance assumes a foreign currency tailwind of approximately 2% to year-over-year total revenue growth in the fourth quarter, based on current exchange rates.

Turning now to the expense outlook. We anticipate that our full-year 2023 total expenses will be in the range of $87 billion to $89 billion, lowered from our prior range of $88 billion to $91 billion. This outlook includes approximately $3.5 billion of restructuring costs related to facilities consolidation charges and severance and other personnel costs. We expect Reality Labs operating losses to increase year-over-year in 2023. We are also sharing a preliminary outlook for 2024 expenses, CapEx and our tax rate. We expect full-year 2024 total expenses to be in the range of $94 billion to $99 billion. We continue to expect a few factors to be drivers of total expense growth in 2024. First, we expect higher infrastructure-related costs next year.

Given our increased capital investments in recent years, we expect depreciation expenses in 2024 to increase by a larger amount than in 2023. We also expect to incur higher operating costs from running a larger infrastructure footprint. Second, we anticipate growth in payroll expenses as we work down our current hiring underrun and add incremental talent to support priority areas in 2024, which we expect will continue to shift our workforce composition toward higher-cost technical roles. Finally, for Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in AR/VR and our investments to further scale our ecosystem. Turning now to the capex outlook. We expect 2023 capital expenditures to be in the range of $27 billion to $29 billion, updated from our prior estimate of $27 billion to $30 billion.

We anticipate our full-year 2024 capital expenditures will be in the range of $30 billion to $35 billion, with growth driven by investments in servers, including both non-AI and AI hardware, and in data centers as we ramp up construction on sites with the new data center architecture we announced late last year. On to tax. Absent any changes to US tax law, we expect our fourth quarter 2023 and full-year 2024 tax rates to be similar to the third quarter of 2023. Please note that our outlook for 2024 expenses, capital expenditures and tax rate are preliminary estimates. In the future, we expect to provide our forward — our initial forward year expense, capex and tax rate outlooks on the fourth quarter call. In closing, this was a good quarter for our business as our efficiency efforts are translating into improved financial results and we’re seeing momentum across our company priorities.

We’re excited to build on this work in 2024 as we invest in areas that have the potential to meaningfully transform how people engage with our services and each other in the years ahead. With that, Dave, let’s open up the call for questions.

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Q&A Session

Operator: [Operator Instructions] Your first question comes from the line of Brian Nowak with Morgan Stanley.

Brian Nowak: Great. Thanks for taking our questions. I have two. The first one, Mark, just wanted to ask you about the open source model strategy. You’ve been a leader in developing a lot of unique open source AI models. You’ve got some high-profile distribution partners now. How do you think about the strategic opportunity for Meta from the growing open source model adoption? And then the second one, Susan, just on the operating losses at Reality Labs. I understand there’s product development and efforts to scale the ecosystem. Can you help us understand or give us examples of expenditure going on within Reality Labs that could also be ported and used over at Family of Apps perhaps over time?

Mark Zuckerberg: Sure, okay. I can start with the AI models. We have a pretty long history of open sourcing parts of our infrastructure that are not kind of the direct product code. And a lot of the reason why we do this is because it increases adoption and creates a standard around the industry, which often drives forward innovation faster so we benefit, our products benefit, as well as there’s more scrutiny on kind of security and safety-related things so we think that there’s a benefit there. And sometimes, more companies running models or infrastructure can make it run more efficiently, which helps reduce our costs as well, which is something that we’ve seen with open compute. So I think there’s a good chance that, that happens here over time.

And obviously, our CapEx expenses are a big driver of our costs, so any aid in innovating on efficiency is sort of a big thing there. The other piece is just that over time with our AI efforts, we’ve tried to distinguish ourselves as being a place that does work that will be shared with the industry and that attracts a lot of the best people to come work here. So a lot of people want to go to the place to work where their work is going to touch most people. One way to do that is by building products that billions of people use. But if you’re really a focused engineer or researcher in this area, you also want to build the thing that’s going to be the standard for the industry. So I know that’s pretty exciting and it helps us do leading work.

While at the same time, a lot of the secret sauce that goes into our product has specific product logic on top of the model, and we’re also able to further train the models with data that we have internally. So I think it’s a good balance of improving the quality of what we do and improving the economics around it and improving recruiting while still enabling us to build a leading product.

Susan Li: And Brian, I’ll go ahead and take your second question, which is on the operating losses at Reality Labs and whether there’s any benefit to Family of Apps from some of that work. So first, I should clarify, the majority of our Reality Labs costs are direct costs in headcount, operating expenses and product costs for the Reality Labs work. The remainder of the Reality Labs total costs are indirect costs such as facilities that get allocated based on our estimate of their benefit to Reality Labs. Now, as you alluded to, Reality Labs is working to build the future of online interactions. And we do expect you’ll see some interesting ways that translate into work with the Family of Apps in the near term. For example, with avatars, you’ve already seen 1 billion avatars created so far.

We expect that this will become increasingly important across the Family of Apps. And we’re also starting to see how our hardware can help create unique content for Facebook and Instagram today with our Ray-Ban Meta smart glasses making it easier to capture and share to Family of Apps, including live-streaming, and we think that will obviously create more engaging content for the content ecosystem. Longer term, obviously, we think there’s a lot of value from operating our Family of Apps experiences on top of a new computing platform that we helped develop, for example, having glasses on that enable you to have our Meta AI assistant with you at all times. And as glasses scale, they’ll make it increasingly easy to capture compelling content from a first person point of view while you’re staying in the moment or the activity that you’re doing and sharing that content should enrich our content ecosystems even further.

But again, the operating losses that are occurring within the Reality Labs segment are really driven by the Reality Labs work directly. And we think that over the sort of arc of the years ahead, there will be increasing shared benefits to our Family of Apps experiences.

Operator: Your next question comes from the line of Eric Sheridan with Goldman Sachs.

Eric Sheridan: Thanks for taking the questions. Maybe on the business, I have two. One, when you see maybe a wider divergence than we thought in terms of some of the regional performance of the advertising businesses, anything to call out region by region in teams of either macroeconomic conditions or levels of product initiatives having been rolled out in different parts of the world that might led to a wider divergence in operating performance in the ad business across the globe would be number one? And then two, Susan, you introduced this concept a couple of quarters ago about data center architecture, and you said it’s now being deployed in the way you’re allocating capital into the business. Is there any update on how we should be thinking about that on a multiyear view in terms of achieving additional capital efficiencies and be able to deploy less CapEx but maybe with a higher throughput or output on those dollars spent? Thank you.

Susan Li: Thanks, Eric. So your first question, I think, was about regional trends or regional themes in our ad revenue, which as you saw this quarter accelerated across all regions. To give you a little bit of color, in North America, we saw accelerate by 7 points due primarily to strong demand from China advertisers. Note that North America didn’t experience the same currency tailwinds that drove acceleration in year-over-year growth for the other regions. In the EU or in our EU region, we saw that accelerate 21 points. There was a broad-based acceleration in the region, including demand from China advertisers and some benefit from currency tailwinds after facing currency headwinds in Q2. Asia Pacific accelerated 9 points.

We benefited from stronger demand in Southeast Asian countries, and again, the flip to currency tailwinds versus headwinds in Q2. Rest of World accelerated 20 points. We saw both stronger pricing and the same currency dynamic there. Brazil was a strong contributor to the region’s acceleration due in part to increased advertisers’ demand from China advertisers targeting users in Brazil. Your second question was around the impact of the new data center architecture on our CapEx investments in the years to come. We are still relatively early on this. We had to pause some of our existing data center construction work to switch over to the new data center architecture that played through in some of our 2023 CapEx dynamics. And going forward, as I think we said when we introduced the concept of this architecture, we expect it to be more cost efficient for us.