Shares of Meta surged on Friday following the release of its fourth-quarter earnings report, which showed a significant increase in profit and the announcement of its first-ever dividend. The stock price of Meta rose by approximately 17% in U.S. premarket trading.
Meta reported a 25% increase in revenue in the fourth quarter, reaching $32.2 billion, the fastest growth rate since mid-2021. This growth was attributed to a rebound in the online advertising market. The company’s net income more than tripled, reaching $14 billion, up from $4.65 billion in the same period a year earlier.
In a significant move, Meta announced that it would issue a cash dividend of 50 cents per share on March 26, marking the company’s first-ever dividend payment. This decision comes as Meta’s cash and equivalents grew to $65.4 billion at the end of 2023, up from $40.7 billion a year earlier.
Additionally, Meta revealed a $50 billion share buyback program, which was welcomed by investors. Ben Barringer, a technology analyst at Quilter Cheviot, described the dividend announcement as a “symbolic moment,” highlighting Meta’s turnaround since its struggles in 2022. He emphasized that Meta’s CEO, Mark Zuckerberg, is demonstrating a commitment to shareholders and positioning Meta as a mature and grown-up business.
Investors have also been paying attention to Meta’s advancements in the artificial intelligence (AI) space. The company’s LLaMA large language model, which competes with Microsoft-backed OpenAI’s GPT-4, has positioned Meta as a significant player in AI. Barringer referred to Meta as a “closet AI winner,” noting that while its AI initiatives are not yet widely publicized, they are expected to enhance advertising services and improve ad relevance for users.
The announcement of cash dividends is uncommon in the technology sector, where companies are typically valued based on their ability to achieve high growth rates that require reinvestment of cash into the business. Zuckerberg’s emphasis on efficiency in 2023 appears to have resonated with investors, as Meta’s cost-cutting measures have resulted in a doubling of its operating margin to 41%.
Despite concerns raised by investors about Meta’s ventures into areas like virtual reality and the metaverse in 2022, which were costly initiatives, the company’s cost-cutting efforts have paid off. Meta reported an 8% decrease in expenses compared to the previous year, amounting to $23.73 billion, partly due to a significant reduction in headcount, with 20,000 layoffs in 2023.
In the fourth quarter, Meta’s Reality Labs unit achieved sales exceeding $1 billion, but the virtual reality unit recorded losses of $4.65 billion. These results indicate both the potential and the challenges of Meta’s investments in emerging technologies.
(Source: Bloomberg | CNBC | CNN | WSJ)
