Exceeding investor expectations, cash flow surged, driving shares higher as the tech giant approved a $50 billion share buyback program
After a robust fourth-quarter earnings report, Meta’s shares surged by 15% in after-hours trading. This came shortly after CEO Mark Zuckerberg faced a tough congressional hearing.
Additionally, the company revealed plans to issue a dividend of 50 cents per share to investors for the first time and authorized a $50 billion share buyback program.
In total, Meta announced fourth-quarter revenue of $40.1 billion, surpassing the anticipated $39.18 billion and marking a 25% increase compared to the previous year. This report coincides with Meta’s efforts, along with other major tech companies, to incorporate artificial intelligence tools into its primary products. In a statement accompanying the report, Zuckerberg stated that Meta has “made significant progress in realizing our vision for advancing AI and the metaverse.”
The company’s press release stated, “We anticipate that our ambitious long-term AI research and product development endeavors will necessitate increased infrastructure investments beyond the current year.”
During the earnings call for the previous quarter, Zuckerberg highlighted Meta’s commitment to AI investment, indicating that it would be the company’s primary investment focus in 2024. In a video posted on Instagram earlier in January, Zuckerberg announced that the company would acquire $9 billion worth of Nvidia chips to facilitate its AI scaling efforts.
Zuckerberg has stated that AI will be utilized to improve advertising campaigns, boost advertising revenue, and aid in the development of new Meta products, such as AI chatbots. Advertising revenue, the company’s primary business, reached $38.7 billion, up from $31.25 billion in the same period the previous year. Meta’s hardware products, like the Quest 3 VR headset, have not yet made a significant contribution to the company’s revenue. During Thursday’s call, Zuckerberg expressed his anticipation for Meta to expand the rollout of AI services in the coming months.
In 2023, Meta implemented significant cost-cutting measures, leading to the layoff of over 20,000 employees, which CEO Zuckerberg described as a “year of efficiency.” These efforts seemed to yield positive results, as Meta’s operating margin doubled to 41% from 20% in the same quarter of 2022. Additionally, expenses decreased by 8% year over year to $23.73 billion. During the call, Chief Financial Officer Susan Li stated that Meta had more than 67,300 employees at the end of the fourth quarter, a 22% decrease from the same time the previous year but a 2% increase from the third quarter, indicating that “hiring efforts have resumed.”
Investors are likely concerned about regulatory challenges following Meta’s public scrutiny during a congressional hearing on Wednesday. The hearing, which questioned Zuckerberg and other tech executives about their platforms’ impact on young users, prompted the CEO to express condolences to parents in the audience whose children had been victims of online exploitation.
During the hearing, lawmakers discussed legislation that could revoke Meta’s and other platforms’ legal immunity for content posted on their platforms. This development comes after Meta faced a major lawsuit from attorneys general of 41 states, accusing the company of negatively impacting young users. Furthermore, the attorney general of New Mexico has sued Meta for allegedly failing to prevent child sexual exploitation and trafficking.
Due to regulatory concerns, Meta has aimed to diversify its core business, which historically relied heavily on advertising through extensive user data collection. Reality Labs, responsible for developing its virtual reality products, incurred losses of $4.65 billion in the fourth quarter, up from $4.28 billion for the same period the previous year, contributing to an overall loss of $16.12 billion for 2023. In a press release, Meta stated that it anticipated operating losses for Reality Labs to “significantly increase year-over-year” as it continues efforts to expand the ecosystem.
In addition to regulatory worries, Meta has faced a decline in user numbers for its platforms, particularly among young users who are migrating to newer platforms like TikTok. Insider Intelligence principal analyst Jasmine Enberg noted that the company’s platforms are experiencing faster growth outside of the US.
“In terms of usage, Facebook’s user growth remained constrained, with the majority of new users originating from regions outside of North America,” she explained. “In the US, the platforms’ popularity among teens has become a concern for lawmakers, potentially impeding the growth efforts of both Facebook and Instagram in that market.”