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Meta shares soar on resilient earnings and $40 billion in buybacks

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Mark Zuckerberg outlined plans to further control Meta’s costs in what he considered a “year of efficiency” for the social media company shares , as its shares surged on better-than-expected sales, tips for cut spending and another $40 billion share buyback. .

Meta, which owns Facebook, Instagram and WhatsApp, reported fourth-quarter revenue of $32.2 billion on Wednesday, down 4% from a year earlier but at the top of its range. forecast and slightly above analyst estimates.

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

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Meta shares jumped around 19% in after-hours trading. If that gain continues, it would add about $76 billion to its market value, according to Bloomberg data shares , largely offsetting the $89 billion hit by its third-quarter results amid investor concern over its expensive bet on the metaverse.

Fourth quarter results paint a rosier picture for Meta shares , which has been squeezed over the past year by the economic shares downturn that prompted marketers to cut spending, as well as increased competition from TikTok and challenges related to the adaptation and measurement of advertising campaigns following Apple’s privacy changes. .

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Still, its profits took a hit in the quarter, which is blamed on a restructuring cost of $4.2 billion in the quarter related to plant consolidation, job cuts and the cancellation of multiple data centers.

Net income in the fourth quarter fell 55% to $4.7 billion, from consensus estimates of a drop to $6 billion.

At the start of the call with investors, an optimistic Zuckerberg stated his “managing theme for 2023. . . is the year of efficiency”.

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He said Meta is now focused on removing some layers of middle management, reducing underperforming projects and deploying artificial intelligence tools to help its engineers be more productive.

“We’re going to be able to do even more to improve our productivity, speed and cost structure,” Zuckerberg said. “2022 has been a difficult year.

But I think we ended up making good progress on our top priorities and we’re setting ourselves up for better results this year, as long as we keep pushing on efficiency.

Meta, which had rapidly increased its workforce since the start of the coronavirus pandemic, sought to cut costs as Wall Street increasingly questioned its money-losing efforts to build an avatar-filled digital world known as of metaverse.

As with his many other virtual and augmented reality projects, they aren’t expected to generate returns for many years.

In the fourth quarter, revenue for Reality Labs, its metaverse unit, fell to $727 million from $877 million a year ago, while losses were $4.3 billion from $3.3 billion. dollars the previous year.

In November, Meta announced its largest workforce reductions, laying off 11,000 employees, or about 13% of the total number of employees. It has also introduced other measures such as cutting budgets and employee benefits, and reducing its “real estate footprint”.

On Wednesday, the company forecast revenue for the current quarter between $26 billion and $28.5 billion. It also projects 2023 spending in the range of $89 billion to $95 billion, down from an earlier outlook of $94 billion to $100 billion, due to “slower anticipated growth in payroll costs and cost revenues”.

It expects an additional $1 billion in restructuring charges, down from a previous estimate of $2 billion.

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

He also said he hopes Meta will become “a leader” in generative AI, a rapidly emerging technology that can be used to produce new content such as graphics or literature. “You’ll see us launching a number of different things this year,” Zuckerberg said.

Meta’s growing user base also remained a positive. Monthly active users on one or more of its apps grew 4% to 3.74 billion in the fourth quarter, while the number of Facebook app users specifically grew 2% to 2.96 billion. .

UBS analyst Lloyd Walmsley said in a note that he could “see a path to double-digit rates.” [revenue] growth” by the end of 2023, as well as strong growth in earnings per share. “These results show significant improvement around key overhangs and . . . stocks are underheld by long-term investors in our view.

Additional reporting by Nicholas Megaw

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