Meta, the parent company of Facebook, has reported a 3% growth in sales during the first quarter of 2023, a positive reversal from three consecutive quarters of revenue decline. This growth has far exceeded Wall Street analysts’ expectations, causing Meta shares to soar as much as 12% in after-hours trading. Meta’s strong trajectory is attributed to Mark Zuckerberg‘s announcement that 2023 will be a “year of efficiency.” In addition to the positive sales growth, Meta’s user growth also showed promise, with monthly active people on Meta’s family of apps increasing by 5% to over 3.8 billion and Facebook’s daily active users increasing by 4% to over 2 billion. Despite the positive results, Meta still faces a long road ahead.
According to the company’s latest report, profits have dropped by almost 25% compared to the same period last year, down to $5.7 billion. Additionally, the price per advertisement – a crucial metric for assessing the strength of the company’s core digital ad business – fell by 17% year-on-year.
Meta undergoes massive restructuring, plans to reduce workforce by a quarter
Meta, formerly known as Facebook, is navigating a tumultuous period marked by intense competition, economic uncertainty, and a multibillion-dollar project to create the metaverse. In an effort to bounce back, Meta announced a plan to eliminate 11,000 jobs in November, followed by another round of layoffs affecting 10,000 employees in March. The total workforce reduction will amount to 25%. The company took a hit of over $1 billion due to the restructuring in the March quarter, and anticipates additional charges of approximately $500 million related to the 2023 layoffs by the end of the year.
On a call with analysts on Wednesday, Zuckerberg revealed that Meta began its “efficiency work” towards the end of last year, during a period when the company’s performance was not up to his expectations. However, the CEO expressed confidence that Meta is now undertaking this work from a position of strength.
In positive news for investors, Meta anticipates revenue growth in the current quarter, compared to the previous year, and has slightly reduced its full-year expenses. This development is likely to boost investor optimism regarding the company’s future performance.
Meta Starts the Year of Efficiency Strongly with Emphasis on AI, Says Insider Intelligence Analyst
According to Debra Aho Williamson, principal analyst at Insider Intelligence, Meta is off to a stronger start than expected in the year of efficiency. However, she warns that the company cannot be complacent in the current environment. As with other tech companies, Meta has shifted its focus to artificial intelligence, responding to investor cues. This move follows the increasing popularity of AI tools from rivals like Microsoft and OpenAI.
Mark Zuckerberg has also highlighted Meta’s focus on AI in his latest statement, citing the positive impact on their apps and business. He further explained that the company’s AI efforts include developing chat experiences in WhatsApp and Messenger, visual creation tools for Facebook and Instagram posts, and advertisements. As the industry becomes more competitive, Meta’s emphasis on AI could be the key to maintaining its position.
By: Mr. WWK