It estimated first-quarter revenues that might surpass Wall Street projections and cut costs in 2024 by $5 billion, to a range of $89 billion to $95 billion, a significant decrease from the $94 billion to $100 billion it had previously forecasted.
Shares of Meta Platforms Inc. (META.O) soared on Wednesday as a result of tighter cost controls this year and a new $40 billion share repurchase, as CEO Mark Zuckerberg declared 2024 the “Year of Efficiency.”
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The parent company of Instagram and Facebook, which has struggled amid a general post-pandemic dip in digital advertising, is concentrating on enhancing its artificial intelligence-powered content recommendations and ad targeting systems to keep people clicking.
Despite competitors like TikTok capturing younger consumers and Apple Inc.’s (AAPL.O) privacy upgrades continuing to pose a threat to the targeted ad industry, the digital ad behemoth faced a challenging 2022 as businesses cut back on marketing expenditure because of economic concerns.
The Market
After-hours trading saw a nearly 19% increase in Meta shares. If Thursday’s gains continue, the market value of the stock will increase by more than $75.5 billion, giving it its greatest intraday jump in ten years. The stock currently has a market capitalization of $401 billion.
In the meantime, it plans to reduce expenses in 2024 by $5 billion, bringing them down significantly from the $94 billion to $100 billion it had previously predicted. It also anticipates first-quarter revenues that may surpass Wall Street expectations.
Evolution
As part of the company’s natural evolution, Zuckerberg characterised the emphasis on efficiency as a “phase change” for a business that originally operated under the maxim “move fast and break things.”
In a conference call, Zuckerberg claimed, “For like the first 18 years, we simply grew so swiftly. “When you’re developing that quickly, efficiency is incredibly difficult to maintain. Simply put, I believe our current climate is different.”
Cost Cuts
According to a statement from Meta, the price reductions reflect the company’s revised intentions for lower data-center construction costs this year as part of a transition to a framework that can support both AI and non-AI activity.
In response, Meta slashed more than 11,000 workers in November, setting off the subsequent tens of thousands of layoffs in the tech sector.
Efficiency
In a statement, Zuckerberg added, “Our management theme for 2024 is the ‘Year of Efficiency’ and we’re focused on making a stronger and more agile corporation.”
On the conference call, he stated that Reels on Facebook’s monetization efficiency had doubled in the previous six months and that the company was on schedule to roughly break even by the end of 2024 or the beginning of 2024 and then grow profitably after that.
Final Payoff for Investments
According to Jesse Cohen, senior analyst at Investing.com, Meta’s better-than-feared performance “should dispel concerns over the state of the digital advertising sector given Snap’s terrible outlook earlier this week.”
There are indications that Meta is still performing well, Cohen added, despite all of the difficulties it faces.
In after-hours trading on Wednesday, shares of SNAP INC. (SNAP.N) increased 1% while those of peer Alphabet Inc. (GOOGL.O) increased 3.3%.
Executives stated on the conference call that Meta’s efforts in AI-surfaced content and TikTok rival Reels were beginning to pay off. The business has also been utilising AI to target advertising with less personal data and boost automation for advertisers, increasing return on ad spend.
Revenue for the first quarter was predicted by Meta to range between $26 and $28.5 billion. According to Refinitiv, that was in line with the $27.14 billion average analyst expectation.
The net income for the fourth quarter that ended on December 31 decreased from $10.29 billion, or $3.67 per share, a year earlier to $4.65 billion, or $1.76 per share. Analysts had projected a $2.22 per share profit.
The reduction was primarily caused by a $4.2 billion charge for cost-cutting measures like layoffs, office closures, and the revision of the data centre strategy.
The business previously stated that it intended to cover a large portion of the expense in 2024.
AI : This Year’s Theme
In addition to efficiency, Zuckerberg stated that the company’s other major theme for this year would be generative AI, a technology that allows users to command the creation of original text, images, or computer code.
The CEO of Meta was preparing to introduce a number of new products that would “enable creators to be considerably more productive and creative,” but he issued a warning about the expense of maintaining the technology for a huge user base.
Also read: Meta Fined $414 million by Irish Regulators
