Meta beats Street, announces $40-bn buyback; to sack some mid-level staff

'Year of efficiency', says Zuckerberg; shares surge over 20%. The stock has added $237 bn in market value since its November low

Meta Platforms Inc’s stricter cost controls this year and a new $40 billion share buyback sent shares soaring on Wednesday, as CEO Mark Zuckerberg called 2023 the “Year of Efficiency.”

The parent of Instagram and Facebook cut its cost outlook for 2023 by $5 billion to a range of $89 billion-95 billion, and projected first-quarter sales that could beat Wall Street estimates.

Meta stock has added $237 billion in market value since its November low. The shares surged over 20% in intraday trading on Thursday, its biggest intraday jump in nearly a decade, after Zuckerberg pledged to make the social media company leaner. Analysts welcomed the move, with at least three brokerages upgrading their recommendations on the stock after the earnings report.

Zuckerberg described the focus on efficiency as part of the natural evolution of the company, calling it a “phase change” for an organization that once lived by the motto “move fast and break things.” 

“We just grew so quickly for like the first 18 years,” Zuckerberg said in a conference call. “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.” 

The cost cuts reflect Meta’s updated plans for lower data center construction expenses this year as the company shifts to a structure that can support both AI and non-AI work, it said in a statement.

The digital ad giant faced a brutal 2022 as companies cut back on marketing spending due to economic worries, while rivals like TikTok captured younger users and Apple’s privacy updates continued to challenge the business of placing targeted ads.

Meta in November cut more than 11,000 jobs in response, a precursor to the tens of thousands of layoffs in the tech industry that followed.

“Our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization,” Zuckerberg said in a statement.

Monetization efficiency for Reels on Facebook had doubled in the past six months and the business was on track to roughly break even by the end of 2023 or early 2024 and grow profitably after that, he said on the conference call.

“Meta’s better-than-feared results should refute concerns over the state of the digital advertising industry following Snap’s horrible guidance earlier this week,” said Jesse Cohen, senior analyst at Investing.com.

Meta’s layoff plan

Meta Platforms will cut some layers of middle management amid a companywide effort to reduce costs and increase “efficiency,” Chief Executive Officer Mark Zuckerberg said during an earnings call Wednesday. 

The Facebook parent will also look to cut projects that are not performing or are not crucial, and to improve execution of priorities, Zuckerberg said.

This is “just the beginning,” said Susan Li, the company’s chief financial officer. Li also said the Meta is “fully scrutinizing our hiring needs.”