Meta shares soared thanks to flexible earnings and $40 billion in buybacks

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Meta shares jumped on Wednesday after the social media company’s fourth-quarter 2022 sales came in better than expected and it authorized an additional $40 billion in share buybacks.

Meta, which owns Facebook, Instagram and WhatsApp, reported revenue of $32.2 billion, down 4 percent from a year earlier but at the high end of its guidance. It was also just above analyst estimates for a drop to $31.7 billion, according to S&P Capital IQ.

The company also announced an additional $40 billion in share buybacks. Meta shares jumped about 19 percent in after-hours trading. If that gain continues, it will add about $76 billion to its market value, according to Bloomberg data.

The results offer a rosier picture for Meta, which has come under pressure over the past year due to an economic slowdown that has prompted marketers to cut their spending, along with increased competition from TikTok and challenges in designing and measuring ad campaigns after Apple’s privacy changes.

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

However, its earnings took a hit in the quarter due to multibillion-dollar restructuring costs as it seeks to wrestle its finances under increasing grip from investor impatience over its costly bet.

Fourth-quarter net income fell 55 percent to $4.7 billion, compared to consensus estimates for a drop to $6 billion. Meta blamed the $4.2 billion restructuring cost in the third quarter on facility consolidation, job cuts and the cancellation of several data centers.

On a call with investors, CEO Mark Zuckerberg said the company’s “management theme” in 2023 was “efficiency.”

He said the company will focus on removing some layers of middle management, cutting back on low-performing projects, and deploying AI tools to help its engineers be more productive.

“2022 was a challenging year. But I think we ended up making good progress on our key priorities and positioned ourselves to deliver even better results this year, as long as we keep the pressure on efficiency,” Zuckerberg added.

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Meta, which has rapidly expanded its staff since the start of the coronavirus pandemic, has scrambled to cut costs as Wall Street increasingly questioned its losing effort to build an avatar-filled digital universe known as the metaverse. As with many other virtual and augmented reality projects, it is not expected to generate returns for many years.

In November, Meta announced its largest headcount cuts, firing 11,000 employees, or about 13 percent of the total staff. It also introduced other measures such as cutting budgets, employee benefits, and reducing the “real estate footprint”.

On Wednesday, the company expected revenue for the current quarter to be between $26 billion and $28.5 billion. It also expects 2023 expenses to be in the range of $89 billion to $95 billion, down from a previous forecast of $94 billion to $100 billion, due to “expected slower growth in payroll expenditures and cost of revenues.”

It expects an additional $1 billion in restructuring fees, down from a previous estimate of $2 billion.

Additional reporting by Nicholas Megaw

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