Meta Platforms, the parent company of Facebook, Instagram and WhatsApp, reported its fourth-quarter 2023 results on February 1st, handily beating Wall Street estimates. The company also stunned investors by declaring its first ever quarterly dividend of $0.50 per share.
Meta’s revenue rose 25% to $32.17 billion, exceeding expectations of $31.53 billion. Earnings per share came in at $3.67, much higher than the $2.22 expected by analysts. The solid results were driven by Meta’s aggressive cost cutting over the past year as well as a rebound in digital advertising spend.
In addition, Meta provided an upbeat revenue forecast for the first quarter of 2024 in the range of $26 billion to $28.5 billion, calming concerns about the potential impact of a weakening economy this year. The company also announced a new $40 billion share repurchase program.
Meta Declares First Ever Dividend Amid Pressure to Reward Shareholders
The highlight of Meta’s earnings announcement was the company declaring its first ever quarterly dividend of $0.50 per share, payable in May 2024. The dividend declaration appears to be a move to reward shareholders after the stock lost nearly two-thirds of its value last year.
Meta has also faced pressure from investors to return cash to shareholders rather than plow money into ambitious projects like the metaverse that are unlikely to pay off for many years.
The $0.50 per share dividend equates to almost $1.4 billion per quarter based on Meta’s current share count. This will make Meta one of the highest dividend paying tech stocks. Analysts now expect other cash-rich technology companies like Alphabet, Amazon and Apple to also initiate dividends this year.
Strong Ad Revenue Growth Amid Cost Cutting Drives Profit Surge
A key driver behind Meta’s standout Q4 results was a sharp recovery in advertising revenue, which rose 23% to $32 billion. Advertising now makes up over 99% of the company’s total sales.
The rebound in ad spend follows declining ad prices and demand pressures last year amid broad economic uncertainty. However, Meta has clearly benefited from advertisers increasing their budgets to reach the company’s massive 3.74 billion monthly users across its family of apps.
In addition to stronger ad revenue, Meta’s wide-ranging cost cutting initiative last year to improve efficiency bolstered the company’s profitability. Operating expenses fell 9% year-over-year in Q4. This includes a 22% reduction in Meta’s headcount over the past year from about 87,000 employees to 68,000 now.
As a result of higher ad sales and lower operating costs, Meta’s operating profit more than tripled to $8.59 billion compared to $2.46 billion a year earlier. This blew past forecasts of around $5 billion.
|Monthly Active Users
*EPS = Earnings Per Share
The massive 349% year-over-year surge in quarterly operating earnings underscores how Meta has swiftly moved to align costs with slowing revenue growth in a challenging economic period. This gives the company more breathing room even if ad spending drops again.
Upbeat 2024 Revenue Outlook Shows Confidence
In addition to strong fourth quarter results, Meta provided an optimistic revenue outlook for 2024. The company expects Q1 2024 sales between $26 billion and $28.5 billion, exceeding the $27 billion Wall Street consensus.
Meta’s first quarter revenue projection indicates confidence that advertising budgets and pricing will remain resilient this year despite economic risks. It also suggests that usage and engagement across Meta’s family of apps like Facebook and Instagram continues to grow.
The upbeat guidance for early 2024 revenue growth builds on accelerating sales momentum late last year. After ad sales increased by just 3% and dropped 1% in Q2 and Q3 respectively, Meta saw ad revenue jump 10% year-over-year in Q4. This may mark an inflection point as the digital advertising market recovers from last year’s cooldown.
AI Investment Key to Meta’s Future Growth
Alongside its latest financials, Meta emphasized how artificial intelligence (AI) remains essential to powering the company’s products and driving future revenue growth. Last year, Meta consolidated all its AI efforts under one division headed by CTO Andrew Bosworth.
Major AI milestones mentioned during Meta’s earnings call included:
- Making progress on Large Language Models (LLMs) designed to have natural conversations
- LLMs now able to perform hundreds of billions of parameter updates per day
- Testing LLMs internally across various apps and surfaces
- On track to achieve 2024 AI milestones focused on discovery engine integrity and recommender integrity
CEO Mark Zuckerberg reiterated his view that mastering AI, especially natural language processing, will unlock Meta’s metaverse vision and boost user engagement across services like Reels and boost commerce on Marketplace.
While Meta’s AI investments weigh on profitability currently, they could start to bear fruit by mid-decade. By then, AI could potentially raise efficiency by automating content moderation and basic commerce interactions. It may also open up new revenue streams around conversational ads and metaverse virtual worlds.
With Meta shares soaring 20% in after-hours trading following its latest earnings beat, strong guidance and dividend announcement, Mark Zuckerberg appears to have placated Wall Street for now. Investors seem more willing to exercise some patience given tangible progress on cost cuts and AI development.
However, Meta still faces skepticism around the viability and monetization potential of the metaverse. Success here hinges on major technological breakthroughs in areas like human-centered mixed reality hardware and lifelike avatars over the next decade.
For 2023 though, Meta’s immediate priority will be sustaining advertising growth amid a possible recession while keeping costs contained and user engagement high. If the economy holds up reasonably well, Meta looks positioned to deliver double-digit sales growth and much higher profitability in 2024.
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