Meta shares rise on steady earnings and $40 billion in buybacks

Mark Zuckerberg announced plans to keep Meta’s costs under control during what he sees as a “year of efficiency” for the social media company, as its stock jumped to better-than-expected sales, guidance for lower costs and a $40 billion share buyback. .

Meta, which owns Facebook, Instagram and WhatsApp, reported fourth-quarter revenue of $32.2 billion on Wednesday, down 4 percent from a year earlier but at the high end of its guidance and slightly above analysts’ estimates.

The company also cut its 2023 cost forecast by $5 billion and announced an additional $40 billion in share buybacks.

Meta shares rose nearly 19 percent in after-hours trading. If the gain continues, it will add about $76 billion to its market value, reversing an $89 billion hit in its third-quarter results amid investor concerns about the expensive metaverse bet, according to Bloomberg data.

The fourth-quarter results paint a rosier picture for Meta, which was squeezed last year by an economic slowdown that prompted marketers to cut spending, along with increased competition from TikTok and difficulties in designing and measuring ad campaigns following Apple’s privacy changes. .

Still, its profits took a significant hit in the quarter, which it attributed to restructuring costs of $4.2 billion in the quarter related to facility consolidation, job cuts and the elimination of multiple data centers. Fourth-quarter net income fell 55 percent to $4.7 billion, compared with consensus estimates of a decline to $6 billion.

At the beginning of the talks with investors, an optimistic Zuckerberg said, “The management theme for 2023.” . . it is the year of efficiency”. Meta is currently focusing on eliminating some layers of middle management, cutting low-performing projects and implementing artificial intelligence tools to help its engineers be more productive, he said.

“We can do more to improve our productivity, our speed and our cost structure,” Zuckerberg said. “2022 was a difficult year. But I think we’ve made good progress on our top priorities and we’re poised to do even better this year as we continue to improve efficiency.”

Meta, which has rapidly expanded its workforce since the start of the coronavirus pandemic, has sought to cut costs as Wall Street increasingly questions its loss-making efforts to build the avatar-filled digital world known as the metaverse.

As with many other virtual and augmented reality projects, they are not expected to generate revenue for many years. Reality Labs’ fourth-quarter revenue fell to $727 million from $877 million a year earlier, and losses were $4.3 billion, compared with $3.3 billion a year earlier.

In November, Meta announced its largest layoff yet, laying off 11,000 workers, or about 13 percent of its total workforce. He also introduced other measures, such as cutting budgets and employee benefits and reducing his “real estate footprint.”

On Wednesday, the company forecast revenue of $26 billion to $28.5 billion for the current quarter. It also projects 2023 spending in the range of $89 billion to $95 billion, down from a previous forecast of $94 billion to $100 billion due to “slower expected growth in wage costs and the value of revenue.”

It expects another $1 billion in restructuring costs, down from an earlier estimate of $2 billion.

Speaking to analysts, Zuckerberg said the company’s investment in artificial intelligence is paying off, allowing it to recommend more relevant short-form video content to users for its feature called Reels, as well as helping brands better automate, target and measure. their marketing campaigns.

He also said he hopes Meta will be a “leader” in generative artificial intelligence, a fast-growing technology that can be used to create new content such as graphics or literature. “You’re going to see us launch a number of different things this year,” Zuckerberg said.

Meta’s growing user base also remained a bright spot. Monthly active users in one or more of its apps rose 4 percent to 3.74 billion in the fourth quarter, while the number of users for the Facebook app specifically rose 2 percent to 2.96 billion.

Lloyd Walmsley, an analyst at UBS, noted that he “could see a path to double digits.” [revenue] growth” coming to the end of 2023, as well as strong growth in earnings per share. “These results are the main outputs and . . . In our opinion, the shares do not belong to long-term investors.

Additional reporting by Nicholas Megaw

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