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Shares of Facebook parent Meta Platforms (META) surged 15% in after-hours trading Thursday after the company blew past analysts’ expectations in its fourth-quarter earnings, while also announcing its first ever dividend. During the company’s post-earnings conference call, CEO Mark Zuckerberg laid out the company’s playbook to grow the company further with generative artificial intelligence and mixed reality.
Leaner and Meaner Meta Platforms
Meta crushed analysts’ forecasts for the fourth quarter of 2023, with a record revenue of $40.1 billion, while Wall Street expected a top-line number of $38.9 billion. CEO Mark Zuckerberg highlighted in the earnings call that Meta was now a “leaner company” following its “year of efficiency,” allowing it to “execute better and faster.”
He also laid out a positive outlook with a playbook for future growth. Headcount at the firm, which suffered through the cost-cutting, was down 22% over the year, but up 2% from the third quarter as the company restarted hiring to meet its new focus areas. In 2024, the company projects capital expenditure of $30 billion to $37 billion, higher than prior estimates.
Investors boosted the stock after Meta announced a cash dividend of $0.50 per share, while committing to a $50 billion increase in its share buyback program.
Open Source Can Make Meta ‘An AI Leader’
Zuckerberg talked of the company’s playbook for future growth, with a big focus being on AI. Meta launched its own Llama 2 Large Language Model (LLM) last year and the key difference between its offering and that of Microsoft’s collaboration with OpenAI was that it would be fully open source. Zuckerberg outlined his thinking for that decision, saying that open source often becomes the industry standard, which would allow Llama to become the most popular LLM among developers and would allow Meta to hire the best people.
The CEO said that Llama 3 was already in training and was “looking really good,” while he spoke of building a strong foundation for future versions of the AI tool and integrating it into the company’s family of apps that include Facebook, WhatsApp, Instagram and Threads. Zuckerberg said that a major goal for the company was to provide an AI assistant that could be adopted by businesses, consumers, and developers. That could see the company go head to head with premium AI assistant subscription tools from Google (GOOGL) and Microsoft (MSFT).
Reality Labs Crosses $1BN Revenue, With a Catch
The second long-term focus of Meta will be its work in the metaverse and the Reality Labs segment that crossed the $1 billion revenue milestone for the first time in the fourth quarter, though it continued to lose far more money than it made. The investment-heavy business reported a $4.5 billion loss for the period.
The stage is now set for a battle of the headsets as Apple (AAPL) is set to release its Vision Pro headset this week, with a goal to eat into Meta’s 55% market share for virtual reality (VR) headsets in the third quarter. Analysts at Jeffries said the Vision Pro could take just 4% of headset market share this year due to a higher retail price of $3,500 versus Meta’s Quest 3, which starts at $500. Meta investors will take heart from Zuckerberg’s comments that the app required for its headset was the most downloaded app on Christmas day in the app store.
Reels and Threads Continue Strong Progress
Facebook’s Monthly Active Users (MAUs) grew to 3.07 billion users while Monthly Active People (MAP)—or those that accessed a Meta family app at least once in a one month period—increased 6% to 3.98 billion. Given that more than 98% of the company’s revenue comes for advertising, it’s focusing more on monetization metrics.
Average Revenue Per User grew to $10.10 from $8.63 a year ago and this is being driven by a wider range of apps.
Reels, which is a short-form rival to TikTok, saw 3.5 billion reshares per day, according to Zuckerberg. He also noted that the company is putting a big focus on its in-app “recommendations.” That feature encourages users to explore more of the company’s apps and led to a 7% increase in time spent on Facebook and a 6% increase on Instagram in Q3. The Threads platform is also growing with 130 million Monthly Active Users in Q4, up 30 million from the previous quarter.