In a bold move to win over investors, Meta Platforms Inc., led by Chief Executive Officer Mark Zuckerberg, has announced plans to repurchase an additional $50 billion in shares and issue its first-ever quarterly dividend. The announcement comes on the heels of robust fourth-quarter results, where the social media giant reported a staggering 25% gain in sales and tripled profits.
The news triggered a significant surge in Meta’s stock price, with shares soaring over 14% in extended trading. This comes after an already impressive performance, as the stock had already gained 12% in the current year, following nearly tripling in value the previous year.
Mark Zuckerberg, expressing optimism about the company’s trajectory, stated, “We had a good quarter as our community and business continue to grow. We’ve made a lot of progress on our vision for advancing AI and the metaverse.”
The fourth-quarter results exceeded expectations, with revenue reaching $40.1 billion, beating the average analyst estimate of $39 billion. Net income surged to $14 billion, or $5.33 per share, outperforming projections. Meta’s revenue forecast for the first quarter of 2024 is as high as $37 billion, surpassing analysts’ estimates of $33.6 billion.
Despite concerns about global economic uncertainties, Meta outperformed its peers, such as Alphabet Inc., which reported softness in its core search advertising business earlier in the week.
Mayuranki De, a research analyst at Global X, noted, “In the digital advertising sphere, Meta’s outlook is increasingly optimistic. Despite diversifying into areas like virtual-reality headsets, digital advertising remains its revenue cornerstone.”
Chief Financial Officer Susan Li attributed the strong revenue increase to high spending by China-based advertisers and AI-recommended video content. Meta’s daily watch time across its apps saw a remarkable 25% increase from the previous year.
In a strategic move, Meta plans to repurchase shares and issue a quarterly dividend, signaling confidence in its growth prospects. The company’s move makes Amazon.com Inc. and Alphabet Inc. the only holdouts among peers valued at more than $1 trillion. Apple Inc. has intermittently paid dividends since 1987, and Microsoft Corp. started distributing dividends in 2003.
The buyback and dividend announcements reflect Meta’s view of its potential, signaling both bullishness about growth prospects and acknowledgment of limits on cash utilization. While Meta is heavily investing in AI initiatives and virtual reality, regulatory opposition is limiting its acquisition prospects.
For 2024, Meta plans to spend $94 billion to $99 billion, covering infrastructure-related costs, selective hiring, and augmented and virtual reality development. Zuckerberg emphasized operating efficiency, expressing reluctance to significant hiring to keep the company lean.
The earnings report also highlighted Meta’s focus on AI, unveiling research and large language models for free use by developers. Despite excitement about AI, Meta has shifted away from reporting user metrics and will now focus on year-over-year changes in ad impressions and average ad prices at the regional level.
Reels, the vertical videos on Instagram and Facebook, are gaining popularity, being re-shared 3.5 billion times a day. Zuckerberg emphasized the continued improvement of these videos, ads, and the personalization algorithm as a priority for Meta’s future endeavors.
