Feb 1, 2023 - Technology

Meta stock soars following revenue beat, positive outlook

Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images

Shares for Facebook parent Meta jumped more than 17% in after-hours trading Wednesday, after the tech giant beat Wall Street expectations on revenue and user growth.

Of note: Meta also provided positive first quarter guidance and said it expects expenses for the full year to be lower than originally forecasted.

Why it matters: Investors no longer expect Meta to grow at the same blockbuster pace that it used to.

  • Meta brought in 4% less revenue compared to the same quarter the year prior, but it didn't lose more than investors were expecting, which is partly why Wall Street responded positively to the company's results.
  • Meta also announced a $40 billion stock buyback, which shareholders typically welcome.

Driving the news: The company said that, for the first time in December, it reached 2 billion daily active users across its family of apps, which includes Facebook, Instagram and WhatsApp.

  • The majority (67%) of its total user base of 2.9 billion uses at least one of its apps daily.
  • Those figures suggest Meta continues to be the most dominant social network in the world, despite a historically challenging year for its business in 2022.

Details: Meta reported $4.2 billion in restructuring charges for the fourth quarter and says it expects to spend another $1 billion on restructuring costs for the year.

  • Those costs were attributed to a number of short-term operational changes, including severance payments to laid-off employees and early termination fees for office leases.

Between the lines: The company continues to lose a significant amount of money on its virtual and augmented reality division.

  • Reality Labs lost $4.27 billion last quarter, bringing its total losses for the year to $13.71 billion. The unit generated $2.15 billion in revenue last year, down slightly from $2.27 billion in 2021.

Be smart: The company's optimistic projections for its first quarter revenue are an important update considering Meta competitor Snap Inc. on Tuesday told investors that it expects revenue to decline 2%-10% in the same time period.

The big picture: Wednesday's earnings end a year-long losing streak on Wall Street for the company. Meta's stock lost roughly 70% of its value in 2022.

  • Part of that drop was attributed to a slowdown in the ad market, but investors were also skeptical about how quickly the company could make its heavy investments in metaverse-building pay off.

What to watch: Now, Meta looks to be leaning more heavily into artificial intelligence, as an opportunity to boost its lucrative advertising-based social media and messaging business.

  • On an investor call Wednesday, CEO Mark Zuckerberg said he wants Meta to become a leader in generative AI and use the technology to generate images, videos, avatars and 3D assets across its products.
  • "I do think that our philosophy of building these consumer products, focusing on getting them to hundreds of millions or billions of people and then focusing on monetization beyond that ... is the right approach. It served us well," he said.
  • "You can expect us to continue doing that on future things that we do, including hopefully some of the new generative AI products or some of the new metaverse stuff that we're doing. We're going to take the same approach there as well."

By the numbers, via CNBC:

  • Earnings: $1.76 per share
  • Revenue:  $32.17 billion vs $31.53 billion expected, according to Refinitiv
  • Daily Active Users (DAUs): 2 billion vs 1.99 billion expected, according to StreetAccount
  • Monthly Active Users (MAUs):  2.96 billion vs 2.98 billion expected, according to StreetAccount
  • Average Revenue per User (ARPU): $10.86 vs $10.63 expected, according to StreetAccount
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