This is what relief for investors looks like: Meta shares jump by a fifth because the quarterly figures are not as bad as expected. Mark Zuckerberg also promises more efficiency.
The Facebook group Meta performed better than analysts had expected in the past quarter, despite another decline in sales. The relief of investors erupted in a price jump of around 20 percent in pre-market trading on Thursday. Meta also ramped up its share buybacks by $40 billion, and founder and CEO Mark Zuckerberg promised further cost cuts.
2023 should be a “year of efficiency” for the group, said Zuckerberg. The focus is on being “stronger and more agile”. Meta will remove layers in middle management so decisions can be made faster. Projects that do not bring the desired results should be stopped more quickly.
Meta had already announced that around 11,000 jobs would be cut last fall. The group booked restructuring costs of $4.2 billion for the quarter. In the current year, expenses are also expected to be lower than previously estimated, partly due to lower investments in data centers.
In the past quarter, group sales fell by four percent year-on-year to a good 32.16 billion dollars (around 29.3 billion euros). Somewhat lower proceeds of 31.5 billion dollars were expected on the market.
User numbers continue to grow
Meta, with its business pillars Facebook and Instagram, was already hit by the slowdown in the online advertising market in previous quarters. Now there have been signs of recovery in travel and healthcare ads. Overall, quarterly earnings fell 55 percent to $4.65 billion.
Meanwhile, the number of users continues to grow. Facebook now has two billion daily active users – an increase of 16 million within three months. At least one Meta app was last used by 2.96 billion users per day, up from 2.93 billion three months earlier.
Despite the new frugality, the group continues to spend a lot of money on the controversial development of digital worlds under the keyword “Metaverse”. The Reality Labs division, which bundles the virtual reality business, posted an operating loss of around $4.3 billion in the past quarter. This also includes restructuring costs, said CFO Susan Li. For the whole of 2022, the operating minus added up to $ 13.7 billion – with sales of only $ 2.16 billion.
Meta strives for leadership in artificial intelligence
CFO Li reiterated earlier forecasts that Reality Labs’ loss will be even larger this year. Zuckerberg had declared the Metaverse to be the future of the company and changed the company name from Facebook to Meta. Especially after weak numbers for the third quarter, there was grumbling in investor circles about the high losses of Reality Labs. However, Zuckerberg reiterated that the investments are important for the long-term future.
Zuckerberg now also highlighted software with artificial intelligence such as ChatGPT, which can imitate human speech or independently generate images from text descriptions, as an “exciting area”. Meta strives for a leadership role in such technologies. At the same time, the aim is to reduce the currently high costs for computing power in such applications through greater efficiency.
For the current quarter, Meta forecast sales of between $26 billion and $28.5 billion. At least closer to the upper end of the range, that’s above the analysts’ expectation of a good 27 billion. And the group could thus achieve an increase in sales even after several quarters with shrinking revenues – the comparative value from the first quarter of 2022 is $ 27.9 billion.