(Bloomberg) – Shares of Meta Platforms Inc. soared more than 20%, on track for their biggest gain in 10 years, after CEO Mark Zuckerberg announced plans to make the social media giant more lighter, more efficient and more decisive.
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The stock rose in trading after New York markets closed on Wednesday. If the gains hold, the move would be the biggest intraday jump since July 2013. Meta is the best performer in the S&P 500 since the recent November 3 closing low of $88.91, and is poised to more than double in value since then.
Zuckerberg, who has spent the last year promising a distant future in a digital world called the Metaverse, has focused more on immediate issues, like sending users the most relevant videos at the right time, and ultimately earning revenue. important messaging products. He called 2023 “the year of efficiency”.
“We are working on flattening our organizational structure and removing some layers of middle management to make decisions faster, as well as deploying AI tools to help our engineers be more productive,” Zuckerberg said during a appeal to investors. “We will be able to do even more to improve our productivity, our speed and our cost structure.”
Zuckerberg said the company is using AI to improve how it recommends content — a strategy to make the platform more engaging for users and advertisers. Meta is still suffering from a drop in demand for digital ads, which make up the vast majority of its sales, especially to finance and technology customers. But the company also pointed to certain industries, including health and travel, where companies are spending more.
Fourth-quarter sales fell 4% to $32.2 billion, the third consecutive period of decline. Even so, the total beat analysts’ estimates and Meta was forecasting revenue of $26 billion to $28.5 billion for the first quarter, in line with an average projection of $27.3 billion. Analysts predict that Meta will return to growth after the current period.
Snap Inc., the parent company of rival social media app Snapchat, gave a less optimistic outlook on Tuesday, sending its shares down 10%. Snap said it expects sales to decline in the current period, with CEO Evan Spiegel noting that the advertising slump appears to be bottoming out. “Ad demand hasn’t really improved, but it hasn’t gotten significantly worse either,” Spiegel said on a conference call.
Read more: Snap CEO Spiegel Says Digital Advertising Slump Has Leveled Off
Meta, whose shares have gained 27% so far this year, is rebounding from the worst year for its stock in history. The company faced a drop in demand from advertisers due to the weak broader economy as well as a change in Apple Inc.’s iPhone privacy policies, which made more difficult for Meta to offer targeted advertising. Meta cut 11,000 jobs, or 13% of the workforce, in November in its first-ever major layoff.
These cuts came in a quarter that was otherwise an improvement for the company. Facebook, Meta’s flagship social network, now has more than 2 billion daily users, up more than 70 million from a year ago.
The company also increased its share buyback authorization by $40 billion, adding to the remaining $10.9 billion from previous buyback programs. In the fourth quarter, Meta recorded restructuring charges of $4.2 billion related to its job cuts.
Zuckerberg has spent tens of billions of dollars in an effort to build the metaverse – a digital world where people can work and play. These efforts are still in their early stages, which means that much of the investment is not generating immediate returns.
Still, the Menlo Park, Calif.-based company said 2023 spending would be $89 billion to $95 billion, lower than Meta’s previous forecast. That could help ease investor concerns that the company is spending too much on its VR ambitions.
Capital spending in the last quarter jumped to $32 billion. In the fourth quarter of 2021, on the other hand, capital expenditure was $5.54 billion.
–With the help of Subrat Patnaik.
(Updates with the share movement in the second paragraph)
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