Meta revenue rises for first time in nearly a year
Shares in the tech giant soared by more than 10 per cent after hours, amid what CEO Mark Zuckerberg is calling a ‘year of efficiency’.
Facebook parent Meta on Wednesday reported its first increase in sales in nearly a year due to continued improvements in its advertising business, as the company continues to pare back spending during what chief executive Mark Zuckerberg has called a “year of efficiency.”
Mr Zuckerberg attributed some of these gains to Reels, the company’s short-form video product. Mr Zuckerberg said that Reels is increasing overall app engagement and that the company believes it is gaining share in the short-form video market.
“When we started this work last year, our business wasn’t performing as well as I wanted. But now we’re increasingly doing this work from a position of strength,” Mr Zuckerberg said on Wednesday in a call with analysts.
The company reported revenue of $US28.6bn ($A43.3bn), up 3 per cent from a year prior and ahead of expectations of nearly $US27.7bn, according to analysts surveyed by FactSet. That snapped a streak of three quarters in which Meta’s revenue had retreated from the year prior, the only time that has occurred since the company went public in 2012. Shares surged by more than 12 per cent in after-hours trading, as the company also forecast that second-quarter revenue could reach as high as $US32bn.
The tough economic climate, an increasing number of regulations limiting personalised ads and the fallout from Apple’s ad-tracking changes in 2021 have weighed on the digital-ad market. Meta has faced growing competition from TikTok, which in February reached 150 million monthly users in the US.
The 3 per cent increase is an improvement from the 4.5 per cent drop in revenue that the company posted in the final quarter of 2022, indicating that Meta’s heavy investment in artificial-intelligence tools to improve its ad-targeting systems is working.
Those efforts in AI, along with shifting to forms of advertising less dependent on harvesting user data from its platforms, are essential to the company’s plans to bounce back. Meta has made progress in overcoming an Apple privacy change that restricted Meta’s capacity to gather information about what its users do outside its platforms’ walls, The Wall Street Journal reported in January.
Mr Zuckerberg said he expects so-called generative AI to have an impact every one of Meta’s apps and services. He theorised that the technology could help marketers more easily create advertisements for Meta’s services, power chatbots for businesses on Messenger and WhatsApp, and help metaverse users more easily create avatars and virtual worlds.
He also said that he expects Meta to take a more open-source approach to generative AI than companies like Alphabet, Microsoft and Amazon due to their different business models.
“We’re not selling a cloud-computing service where we try to keep the different software infrastructure that we’re building proprietary,” Mr Zuckerberg said. “For us, it’s way better if the industry standardises on the basic tools that we’re using, and therefore, we can benefit from the improvements others make.”
The company said its operating margin would have been four percentage points higher if not for restructuring charges that Meta undertook related to three rounds of lay-offs that it announced in March. These lay-offs, which will be completed in May, are expected to result in the elimination of 10,000 employees, and they come after Meta laid off 11,000 employees in November.
Meta’s family of apps, which includes Facebook, Instagram and WhatsApp, incurred a restructuring charge of $US934m for the first quarter. Reality Labs, the division tasked with building the hardware and software underpinning Meta’s ambitions to build a platform in the metaverse, incurred a $US210m charge.
Mr Zuckerberg in 2021 renamed the company, then called Facebook, to reflect a focus on the so-called metaverse, a more immersive version of the internet where he said users will work and play.
Reality Labs reported revenue of $US339m for the quarter, a decline of 51 per cent compared with a year prior. The unit, which makes Meta’s Quest virtual-reality headsets, posted an operating loss of $US4bn.
“Building the Metaverse is a long-term project, but the rationale for it remains the same and we remain committed to it,” Mr Zuckerberg said.
The company said it expects its 2023 expenses to be between $US86bn and $US90bn, lower than its previous outlook of between $US89bn and $US95bn.
Meta said its average ad price fell 17 per cent year-over-year. In the same quarter last year, the average price per ad decreased by 8 per cent.
Meta’s shares fell by about two-thirds in 2022, erasing more than $US600bn in market value. The company last year warned that Apple’s policy changes alone would translate to $US10bn in lost sales. After Mr Zuckerberg’s efficiency push, the stock has rebounded this year, rising more than 70 per cent through Tuesday’s close.
The company also reported a net profit of $US5.7bn for the first quarter. That represents a roughly 24 per cent decline from the year-ago period, but it is up from $US4.7bn in the October-to-December quarter.
Meta also reported that Facebook’s daily active user base has continued growing and increased to 2.04 billion users, up from 2 billion three months ago.
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