Meta, the parent company of Facebook and Instagram, posted a revenue decline for the third consecutive quarter as it faces a pullback in ad spending and heightened competition from the likes of TikTok. But investors rallied behind the stock, which soared 20% on Q4 results that were better than feared, the company’s relatively upbeat outlook for Q1 and a massive $40 billion stock buyback authorization.
Overall, the internet company reported revenue of $32.17 billion, down 4% year over year, for the fourth quarter of 2022. (Meta said quarterly revenue would have increased 2% on a constant-currency basis.) Net income decreased 55%, to $4.65 billion, as costs grew 22% year over year. Meta previously warned that Q4 sales could be down as much as 10%.
Meta’s stock climbed 20% in after-hours trading, as revenue topped Wall Street’s lowered expectations and Meta also announced a $40 billion increase in its stock buyback program. Even so, the stock is still down nearly 50% from its pandemic-driven highs in 2021.
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Facebook’s user growth has slowed down — but the service remains massive. The company said the service had 2.0 billion daily active users in the fourth quarter, versus 1.984 billion daily active users on average in Q3.
“Our community continues to grow and I’m pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives,” Meta CEO and co-founder Mark Zuckerberg said in announcing the results. “The progress we’re making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”
Wall Street consensus estimates were for revenue of $31.53 billion and earnings of $2.22 per share (compared with Meta’s reported $1.76 EPS for the quarter). Analysts expected Facebook’s Q4 DAUs to come in at 1.99 billion, according to StreetAccount.
Meta CFO Susan Li, in prepared commentary, said the company expects first quarter 2023 total revenue to be in the range of $26 billion-$28.5 billion (vs. $27.9 billion in Q1 2022) — better than analysts were forecasting. The company now anticipates full-year 2023 total expenses to be $89 billion-$95 billion, lowered from its prior outlook of $94 billion-$100 billion “due to slower anticipated growth in payroll expenses and cost of revenue.”
Meta is among tech companies that have slashed their workforces amid economic uncertainty and a drop in ad spending. In November, the social-media giant announced layoffs eliminating 11,000 jobs, or 13% of its employee base, as part of its efforts to reduce costs.
For Q4, Meta recorded $4.2 billion in restructuring charges, including $975 million in severance payments and other personnel costs, $1.88 billion for facilities consolidation and a $1.34 billion write-down on data center assets.
Meta’s Reality Labs, which houses its VR, AR and mixed-reality businesses, was again a drag on the bottom line. The Reality Labs segment generated revenue of $727 million, down 17% on lower sales of the Quest VR headset, and an operating loss of $4.28 billion (vs. $3.3 billion a year prior). Zuckerberg said on the call that Meta plans to release the next generation of its consumer VR headset later this year; the company last fall launched the high-end Meta Quest Pro, priced at $1,500.
Meanwhile, Meta last week made the controversial announcement that it would reinstate Donald Trump’s Facebook and Instagram accounts soon, coming after the ex-president was suspended for violating the company’s policies prohibiting incitement to violence in the wake of the Jan. 6, 2021, attack on the U.S. Capitol.