Meta shares soar on resilient revenue and $40bn in buybacks

Meta shares jumped on Wednesday after the social media company’s sales for the final quarter of 2022 came in better than expected and it authorised an additional $40bn in share buybacks.

Meta, which owns Facebook, Instagram and WhatsApp, reported revenues of $32.2bn, a 4 per cent decline from the year before but at the top end of its guidance. It was also slightly above analysts’ estimates of a drop to $31.7bn, according to S&P Capital IQ.

The company also announced an additional $40bn for share buybacks. Meta shares jumped about 19 per cent in after-hours trading. If that gain holds, it would add about $76bn to its market value, according to Bloomberg data.

The results present a rosier picture for Meta, which has been squeezed over the past year by the economic slowdown that prompted marketers to cut their spending, along with heightened competition from TikTok and challenges in tailoring and measuring ad campaigns following Apple’s privacy changes.

Monthly active users on one or more of its apps rose 4 per cent to 3.74bn in the fourth quarter, while user numbers for the Facebook app specifically rose 2 per cent to 2.96bn.

However, its profits took a substantial knock in the quarter due to billions of dollars of restructuring costs as it seeks to wrestle its finances under control rising impatience from investors over its costly metaverse bet.

Net income in the fourth quarter dropped 55 per cent to $4.7bn, compared with consensus estimates for a drop to $6bn. Meta blamed a restructuring cost of $4.2bn in the quarter related to facilities consolidation, job cuts and the cancellation of multiple data centres.

In a call with investors, chief executive Mark Zuckerberg said that his “management theme” for the company in 2023 was “efficiency”.

The company would focus on removing some layers of middle management, cut low-performing projects and deploying artificial intelligence tools to help its engineers be more productive, he said.

“2022 was a challenging year. But I think we ended up having made good progress on our main priorities and setting ourselves up to deliver better results this year, as long as we keep pushing on efficiency,” Zuckerberg added.

Meta, which expanded its headcount rapidly since the start of the coronavirus pandemic, has sought to bring down costs as Wall Street has increasingly questioned its lossmaking efforts to build an avatar-filled digital world known as the metaverse. As with its many other virtual and augmented reality projects, they are not expected to generate returns for many years.

In November, Meta announced its biggest headcount reductions, dismissing 11,000 staffers, or about 13 per cent of total employees. It also introduced other measures such as reducing budgets and employee perks, and shrinking its “real estate footprint”.

On Wednesday, the company forecast revenues for the current quarter of between $26bn-$28.5bn. It also anticipates 2023 expenses in the range of $89bn-$95bn, down from the prior outlook of $94bn-$100bn, due to “slower anticipated growth in payroll expenses and cost of revenue”.

It expects a further $1bn in restructuring charges, down from a previous estimate of $2bn.

Additional reporting by Nicholas Megaw