Meta stock market surged after breaking its profit record and starting to pay dividends. economy

After finishing a rough year in 2022, Meta’s founder and boss, Mark Zuckerberg, announced that it’s time to buckle up. After massive layoffs at the company, he declared 2023 the year of austerity. Meta, which manages Facebook, Instagram and WhatsApp, closed the year with record profits in the fourth quarter, partly due to cost control, but above all due to strong revenue growth. Zuckerberg attributes this in part to improvements in ad management achieved through artificial intelligence. In addition, it announced the payment of a dividend for the first time and an increase to its share repurchase plan by $50 billion and the stock market rose nearly 15% outside normal trading hours.

According to the accounts published by the company this Thursday, Meta closed the year with revenues of 134,902 million dollars (about 124,000 million euros at the current exchange rate), an increase of 16% compared to 2022. Its profit rose to Rs 39,098 million, up 69% from Rs 23,200 million last year, and very close to the record of Rs 39,370 million set in 2021. Furthermore, the last quarter has been fantastic, with revenue growth of 25%. And a profit of 201%, a record high in this case.

The impressive growth in profit for the year came despite the fact that the company incurred restructuring charges amounting to $3,452 million, mainly derived from severance pay and real estate restructuring. Meta has reduced its workforce by 22% in a year and ended the year with 67,317 employees. The company has been able to grow revenue by 16% with a cost increase of only 1%.

Advertising revenue, which accounts for almost the entire business of the group founded by Mark Zuckerberg, has increased due to investments in artificial intelligence to improve rating and recommendation systems. AI-recommended content from unfollowed accounts has become the fastest-growing category on Facebook. The company also suffered from the decline of the digital advertising market in 2022, as well as exchange rate effects (due to the strengthening of the dollar) and strict privacy rules imposed by Apple, which blocked ad tracking and hit its business hard. made. This also includes competition from TikTok, the social network that has won among youth. Meta has managed to overcome these difficulties, after suffering the first decline in earnings in its history in 2022.

The advertising advantage, in turn, makes it easier for Meta to invest in artificial intelligence and virtual reality. The applications business segment, where Facebook and Instagram are located, remains very profitable, with an operating profit of $62,871 million in 2023, a sharp increase compared to $42,661 million in 2022.

On the other hand, the Reality Labs sector, which includes metaverse and virtual reality devices, continues to be in the red, with a strong operating loss of Rs 16,120 million in 2023, adding to last year’s Rs 13,717 million. And they’ll grow: “We expect operating losses to increase significantly year-over-year due to our investments in our product development efforts in augmented reality/virtual reality and continuing to expand our ecosystem,” about that division. I say meta.

great quarter

The company also ended the year in good shape, with fourth-quarter revenue increasing 25% to $40,111 million, consistent with 8% cost cuts. With this, net profit tripled to Rs 14,017 million in those three months, an absolute quarterly record for the company.

“We had a great quarter as our community and business continue to grow,” Meta founder and CEO Mark Zuckerberg said in a statement. “We have made great progress in our approach to advancing AI and the metaverse,” he said. Zuckerberg celebrated the good results a day after his appearance at the Capitol, where his company and others were the subject of harsh criticism from senators for the harm the social network is causing to minors.

Meta has gained 158% in market share over the last 12 months. Its price is rising into the region of historic highs and its market capitalization has crossed the trillion-dollar mark. The company’s shares rose an additional 15% this Thursday following the publication of the results, which exceeded all Wall Street expectations.

The company has announced that it is launching a quarterly dividend distribution plan. Till now it had never distributed profits among its shareholders. The Board of Directors has already approved a first cash dividend of $0.50 per share, payable to shareholders of record on March 26, 2024, at the close of business on February 22, 2024. “We intend to pay quarterly cash dividends in the future, subject to market conditions and the approval of our board of directors,” the company says.

The company has raised its investment forecast for all of 2024 by $2 billion to a range of $30 billion to $37 billion, due to investments in servers and data centers along with general computing and artificial intelligence. For this year, the company plans to spend between $94 billion and $99 billion, which will include high infrastructure-related costs, selective hiring on high-cost technical positions and developments in augmented and virtual reality. Last quarter, the company said it planned to delay some spending on new hires and infrastructure until 2024. On the earnings side, Meta expects them to be between $34,500 and $37,000 million in the first quarter, which is higher than the forecasts reported by analysts.

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