Analysts didn’t hold great expectations for Meta’s fourth quarter earnings, largely due to a downturn in online advertising and fierce competition from rivals like TikTok. What was most unexpected, however, was how happy Wall Street was with Mark Zuckerberg’s plans.
Despite reporting profit and revenue sliding after market close on Wednesday (Feb. 1), Meta’s stock soared almost 20% in after-hours trading.
Part of it had to do with the revenue besting Wall Street’s muted hopes, and part of it had to do with the $40 billion stock buyback plan the company announced. (In stock buybacks, corporations buy their own shares from existing shareholders to cut down on the number of shares in the open market, eventually boosting earnings per share.)
What also impressed industry watchers is Zuckerberg’s focus on austerity. Especially the suggestion of more layoffs —specifically “reducing layers of management,” in the Meta chief’s words. And as Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies, tweeted, “Wall Street loves layoffs.”
Quotable: Zuckerberg’s “year of efficiency”
“Before getting into our product priorities, I want to discuss my management theme for 2023, which is the ‘year of efficiency.’ We closed last year with some difficult layoffs and restructuring some teams. When we did this, I said clearly that this was the beginning of our focus on efficiency and not the end. Since then, we’ve taken some additional steps like working with our infrastructure team on how to deliver our roadmap while spending less on capex. Next, we’re working on flattening our org structure and removing some layers of middle management to make decisions faster, as well as deploying AI tools to help our engineers be more productive. As part of this, we’re going to be more proactive about cutting projects that aren’t performing or may no longer be as crucial, but my main focus is on increasing the efficiency of how we execute our top priorities.” —Meta CEO Mark Zuckerberg
Meta earnings, by the digits
$32.17 billion: Revenue was higher than the $31.6 billion expected, according to Refinitiv
4%: How much revenue in the fourth quarter fell compared to a year earlier, marking a third straight quarter of declining sales
$4.65 billion: Net income, down 45% year-over-year
20%: Increase in Meta’s headcount year-over-year to 86,482. The reported figure “includes a substantial majority of the approximately 11,000 employees impacted by the layoff we announced in November 2022, who will no longer be reflected in our headcount by the end of the first quarter of 2023,” Meta said
$13.72 billion: Operating losses for Meta’s metaverse division, Reality Labs, for the year, including $4.28 billion in the fourth quarter
$89 billion to $95 billion: Meta’s expected total expenses in 2023, lower than its prior outlook of $94 billion to $100 billion thanks to “slower anticipated growth in payroll expenses and cost of revenue”
$30 billion to $33 billion: Meta’s guidance for capital expenditure in 2023, down from $34 billion to $37 billion, largely attributable to reduced spending on data center construction
$26 billion and $28.5 billion: Revenue Meta is expecting in the first quarter. At the higher end, it would Trump Wall Street’s expectations
2 billion: Facebook daily active users (DAUs), up 4% year-over-year
50%: How much Meta’s stock is still down year-over-year, despite the jump on earnings
Charted: Meta’s stock
One more thing: Meta’s road to an acquisition is clearing up
As its stock popped on earnings day, Meta apparently received another good news. The company is allowed to move forward with its acquisition of virtual reality startup Within, according to a Bloomberg report citing a sealed decision by judge Edward Davila.
In June, Federal Trade Commission (FTC) chair Lina Khan had preemptively sought to block Facebook from buying Within Unlimited—the company behind VR fitness app Supernatural—arguing that it would be an anti-competitive deal. The judge’s decision is a blow to Khan and her broader efforts to push the boundaries of antitrust law to block deals before they even materialize.
Another order by Davila issued a temporary restraining order pausing Meta from closing the transaction for a week while the FTC decides whether to appeal his ruling. Separately, an in-house trial before the FTC’s administrative judge is scheduled to begin on Feb. 13.
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