Meta surprises with better-than-expected quarterly results; focus on improving efficiency
What's the story
Meta aims to make 2023 "the year of efficiency," CEO Mark Zuckerberg said while announcing the company's fourth-quarter earnings report. The social media giant, which had a tumultuous 2022, has surprised its investors and Wall Street with a better-than-expected performance in the last three months of FY2022. However, the talking point of the town is the company's plan to focus on austerity in 2023.
Context
Why does this story matter?
Last year was a forgettable one for most tech companies. Meta was among the most affected. The uncertain economy and falling advertising revenue put the parent of Facebook and Instagram in a chokehold that seemed very hard to get out of. The company's new earnings report, however, suggests that it has finally found a way. That should give hope to other companies.
Q4 results
Meta's fourth-quarter revenue beats the projection of analysts
In the last quarter of 2022, Meta recorded $32.17 billion in revenue, down 4% from $33.67 billion in the year prior. However, the company's revenue was ahead of the $31.5 billion analysts projected. The tech giant's net income fell by 55% from $10.28 billion in Q4 of 2021 to $4.65 billion in 2022. Its costs and expenses ballooned 22% year-over-year to $25.8 billion.
Response
Meta reduces its capital expenditure outlook
For nearly two decades since its inception, Meta went through a phase of "hyper-growth." Last year, the company recorded negative growth for the first time, indicating the end of that phase. In a response to this, Meta has cut its expenditure and total expenses projections this year. The reduced outlook says that the company is adjusting well to the new reality.
Spending
The company will spend less on data center construction
Meta will cut its costs to a range of $89-95 billion, down from the previously expected $94-100 billion. The company's capital expenditure will be cut to $30-33 billion from the previous outlook of $34-37 billion, courtesy of less expenditure on data center construction. The tech giant plans to shift to a new cost-effective architecture that can support both AI and non-AI workloads.
Earnings call
Meta will proactively cut projects that aren't performing: Zuckerberg
During the earnings call, Zuckerberg said, "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." "We're going to be more proactive about cutting projects that aren't performing or may no longer be as crucial," he added. The CEO also reiterated his point about changing Meta's organizational structure focused on middle-management.
Platforms
Daily active users increased by 5% across Meta platforms
Meta's user numbers were another bright sport from the latest earnings report. The company's family of apps grew their daily active users (DAU) by 5% to 2.96 billion. For all the talks about Facebook's slow and certain death, its DAU increased 4% year-over-year to 2 billion. The company's advertising business fell 4% to $31.3 billion - another better-than-expected result.