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/GOOG
/2023.02.01
/Meta stuns Street with lower costs, big buyback, upbeat sales.txt
Feb 1 (Reuters) - Meta Platforms Inc's stricter | |
cost controls this year and a new $40 billion share buyback sent | |
shares soaring on Wednesday, as CEO Mark Zuckerberg called 2023 | |
the "Year of Efficiency."The parent of Instagram and Facebook, which has fallen on | |
hard times amid a broad post-pandemic slump in digital ads, is | |
focused on improving its content recommendations powered by | |
artificial intelligence and its ad targeting systems to keep | |
users clicking.Meanwhile, it will cut costs in 2023 by $5 billion to a | |
range of $89 billion to $95 billion, a steep drop from the $94 | |
billion to $100 billion it previously forecast, and it projected | |
first-quarter sales that could beat Wall Street estimates.Meta stock surged nearly 19% in after-hours trade. If gains | |
hold on Thursday, it would set up the shares for their biggest | |
intraday surge in a decade and added more than $75.5 billion to | |
its existing $401 billion market capitalization.Zuckerberg described the focus on efficiency as part of the | |
natural evolution of the company, calling it a "phase change" | |
for an organization that once lived by the motto "move fast and | |
break things.""We just grew so quickly for like the first 18 years," | |
Zuckerberg said in a conference call. "It's very hard to really | |
crank on efficiency while you're growing that quickly. I just | |
think we're in a different environment now."The cost cuts reflect Meta's updated plans for lower | |
data-center construction expenses this year as part of a shift | |
to a structure that can support both AI and non-AI work, it said | |
in a statement.The digital ad giant faced a brutal 2022 as companies cut | |
back on marketing spending due to economic worries, while rivals | |
like TikTok captured younger users and Apple Inc's | |
privacy updates continued to challenge the business of placing | |
targeted ads.Meta in November cut more than 11,000 jobs in response, a | |
precursor to the tens of thousands of layoffs in the tech | |
industry that followed."Our management theme for 2023 is the 'Year of Efficiency' | |
and we're focused on becoming a stronger and more nimble | |
organization," Zuckerberg said in a statement.Monetization efficiency for Reels on Facebook, a short-form | |
video format, had doubled in the past six months and the | |
business was on track to roughly break even by the end of 2023 | |
or early 2024 and grow profitably after that, he said on the | |
conference call.INVESTMENTS STARTING TO PAY OFF"Meta's better-than-feared results should refute concerns | |
over the state of the digital advertising industry following | |
Snap's horrible guidance earlier this week," said Jesse Cohen, | |
senior analyst at Investing.com."Despite all the challenges Meta must deal with, there are | |
signs the business is still doing well," Cohen said.Shares of peer Alphabet Inc were up 3.3% while | |
Snap Inc stock rose 1% in after-hours trade on | |
Wednesday.On the conference call, executives said Meta's | |
investments in AI-surfaced content and TikTok competitor Reels | |
were starting to pay off. The company also has been using AI to | |
increase automation for advertisers and target ads using less | |
personal data, resulting in higher return on ad spend.Meta forecast first-quarter revenue between $26 billion | |
and $28.5 billion. That was in with analysts' average estimates | |
of $27.14 billion, according to Refinitiv.Zuckerberg said generative AI - technology for producing | |
original prose, imagery or computer code on command - would be | |
the company's other big theme for this year, alongside | |
efficiency.Meta was planning to launch several new products that | |
would "empower creators to be way more productive and creative," | |
he said, while cautioning about the cost associated with | |
supporting the technology for a large user base.However, net income for the fourth quarter ended Dec. 31 | |
fell to $4.65 billion, or $1.76 per share, compared with $10.29 | |
billion, or $3.67 per share, a year earlier. Analysts had | |
expected a profit of $2.22 per share.The decline was largely due to a $4.2 billion charge related | |
to cost-cutting moves such as layoffs, office closures and the | |
data center strategy overhaul.The company previously said it was planning to account for | |
much of that cost in 2023.(Reporting by Nivedita Balu in Bengaluru, Katie Paul in New | |
York, Sheila Dang in Dallas and Sayantani Ghosh in San | |
Francisco; Editing by Matthew Lewis and Bradley Perrett) |