Mark Zuckerberg has developed plans to bring Meta’s costs further under control in what he describes as an “efficiency year” for the social media company, as its stock plummets on better-than-expected sales, lower spending forecasts and a new share buyback in skyrocketed to US$40 billion.
Meta, which owns Facebook, Instagram and WhatsApp, on Wednesday reported fourth-quarter revenue of $32.2 billion, down 4 percent from a year earlier, but at the high end of its guidance and slightly above analysts’ estimates .
The company also lowered its 2023 spending guidance by $5 billion and announced an additional $40 billion in share buybacks.
Meta shares are up about 19 percent in after-hours trading. If that gain continues, it would add about $76 billion to its market value, according to Bloomberg data, and largely offset the $89 billion slump in third-quarter results on investor concerns about its costly Metaverse bet turning back.
Fourth-quarter results paint a rosier picture for Meta after the economic slowdown that prompted marketers to cut spending over the past year, coupled with increased competition from TikTok and challenges in customizing and measuring ad campaigns after the Apple’s privacy changes had come under pressure.
Still, earnings took a significant hit in the quarter, attributed to $4.2 billion in restructuring charges in the quarter related to facility consolidation, job cuts and the closure of several data centers. Net income fell 55 percent to $4.7 billion in the fourth quarter, compared to consensus estimates of a decline to $6 billion.
Opening the call with investors, an upbeat Zuckerberg said his “management theme for 2023.” . . is the year of efficiency”. He said Meta is now focused on removing some layers of middle management, trimming underperforming projects and using artificial intelligence tools to help its engineers be more productive.
“There’s still a lot we can do to improve our productivity, speed and cost structure,” Zuckerberg said. “2022 was a challenging year. But I think we ended up making good progress on our key priorities and are set to deliver better results this year as we continue to work on efficiency.”
Meta, which has been rapidly expanding its headcount since the coronavirus pandemic began, has sought to cut costs as Wall Street increasingly questions its loss-making efforts to build an avatar-filled digital world known as the Metaverse.
As with many other virtual and augmented reality projects, no returns can be expected for many years. In the fourth quarter, revenue at Reality Labs, its Metaverse unit, fell to $727 million from $877 million a year earlier, while losses were $4.3 billion, compared to $3.3 billion in the prior year. dollars in the previous year.
In November, Meta announced its largest workforce reduction, laying off 11,000 employees, or about 13 percent of all employees. It also introduced other measures, such as cutting budgets and employee benefits, and reducing its “real estate footprint.”
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On Wednesday, the company forecast sales of between $26 billion and $28.5 billion for the current quarter. It also projects 2023 spending of $89 billion to $95 billion, down from the previous guidance of $94 billion to $100 billion due to “slower expected growth in labor costs and cost of sales.”
It expects an additional $1 billion in restructuring costs, up from a previous estimate of $2 billion.
Speaking to analysts, Zuckerberg said the company’s investment in AI has paid off because it can recommend users more relevant short-form video content for its Reels feature, and help brands better automate, target and measure their marketing campaigns.
He also said he hopes Meta would become a “leader” in generative AI, a rapidly developing technology that can be used to create novel content such as graphics or literature. “You’ll see that we’re launching a number of different products this year,” Zuckerberg said.
Meta’s growing user base also remained a bright spot. Monthly active users of one or more of its apps grew 4 percent to 3.74 billion in the fourth quarter, while users for the Facebook app specifically grew 2 percent to 2.96 billion.
Lloyd Walmsley, an analyst at UBS, said in a note that he “could see a way towards double digits [revenue] Growth” in late 2023 and strong growth in earnings per share. “These results show significant improvement around key overhangs and . . . In our opinion, shares are not owned enough by long-term investors.”
Additional reporting by Nicholas Megaw