Mark Zuckerberg has laid out plans to further fight the costs of Meta under control in what he considers “years of efficiency” for the social media company, as the shares increase in more than expected sales, guidance for lower expenses and a new $40bn buyback of shares .
Meta, which owns Facebook, Instagram and WhatsApp, reported fourth-quarter revenue of $32.2bn on Wednesday, a 4 percent drop from a year earlier, but at the top end of its guidance and slightly above analysts’ estimates.
The company also cut its 2023 cost outlook by $5bn and announced an additional $40bn in share buybacks.
Meta shares jumped about 19 percent in after-hours trading. If the gain continues, it will add about $76bn to the market value, according to Bloomberg data, largely reversing the $89bn hit in third-quarter results amid investor anxiety over the metaverse’s high-priced bets.
Fourth-quarter results show a better picture for Meta, which has been hit hard over the past year by the economic downturn that has caused marketers to cut spending, along with heightened competition from TikTok and the challenge of managing and measuring ad campaigns following Apple’s privacy changes . .
Still, profits took a huge hit in the quarter, which was blamed on restructuring costs of $4.2bn in the quarter related to facility consolidation, job cuts and the cancellation of some data centers. Net income in the fourth quarter fell 55 per cent to $4.7bn, compared with consensus estimates of a drop to $6bn.
At the start of the call with investors, an optimistic Zuckerberg said “the theme of management for 2023 . . . is the year of efficiency”. become more productive.
“There’s more we can do to improve productivity, speed and cost structure,” Zuckerberg said. “2022 is a challenging year. But I think we have made good progress on our main priorities and set ourselves up to produce better results this year, as long as we continue to work on efficiency.
Meta, which has expanded its headcount rapidly since the start of the coronavirus pandemic, is seeking to cut costs as Wall Street increasingly questions its loss-making efforts to build a digital universe filled with avatars known as the metaverse.
As with many virtual and augmented reality projects, it is not expected to generate returns for many years. In the fourth quarter, profits from Reality Labs, a unit of metaverse, fell to $727 million from $877 million a year ago, while the loss was $4.3 billion compared to $3.3 billion a year ago.
In November, Meta announced its largest-ever layoff, cutting 11,000 employees, or about 13 percent of its total workforce. It also introduced other measures such as reducing the budget and employee benefits, and reducing the “real estate footprint”.
On Wednesday, the company forecast profits for the current quarter between $26bn-$28.5bn. It also expects 2023 costs to be in the range of $89bn-$95bn, down from its previous outlook of $94bn-$100bn, due to “slower growth in salary costs and income costs”.
They expect restructuring costs of $1 billion, down from a previous estimate of $2 billion.
In a call with analysts, Zuckerberg said the company’s investment in AI has paid off, allowing it to recommend more relevant short video content to users for its Reels feature, as well as helping brands better automate, target and measure. their marketing campaign.
He also said that Meta will be a “leader” in generative AI, a fast-growing technology that can be used to generate novel content such as graphics or literature. “You’re going to see us launch a lot of different things this year,” Zuckerberg said.
Meta’s growing user base also remains a bright spot. Monthly active users of one or more of these apps rose 4 percent to 3.74 billion in the fourth quarter, while the number of users for dedicated Facebook apps rose 2 percent to 2.96 billion.
Lloyd Walmsley, an analyst at UBS, said in a note that he could “see the road to double digits [revenue] growth” comes to the end of 2023, as well as strong growth in earnings per share. “The results show a significant improvement in key overhangs and . . . the stock is not owned by long-term investors in our view.
Additional reporting by Nicholas Megaw