Meta Platforms issued its first dividend days ahead of flagship social network Facebook’s 20th anniversary, while reporting revenue and profit that beat expectations on robust ad sales in the holiday shopping period.
Shares soared more than 14% after the closing bell, pushing the company’s stock market valuation up by more than US$140-billion and extending a long recovery that saw Meta hit record highs in recent weeks for the first time in more than two years.
The after-hours gains alone amounted to more than quintuple the entire value of social media rival Snap.
Meta, one of the tech sector’s original unicorns, said its dividend would be $0.50/share. It also announced it had authorised an additional $50-billion in share repurchases.
The social media giant is the first of its generation of internet juggernauts to issue a dividend, a milestone for a tech sector that has been dominated by the same handful of companies for well over a decade.
Founded in a university dorm room in 2004, it has grown into the world’s biggest social media company, connecting more than three billion people and revolutionising how they discover trends, communicate with their neighbours and engage with politics.
The company, which owns Instagram and WhatsApp, has also been accused of ignoring a multitude of harms on its path to growth, including violations of user privacy and incitements to violence.
‘Just keep building’
Just a day before announcing results, CEO Mark Zuckerberg was called to testify before the US senate about child safety online and compelled to apologise to parents of children who had experienced sexual abuses.
“You’re never as good as they say when you’re up, or as bad as they say when you’re down. Just keep building and doing good work over long periods of time,” he said on Thursday in a post on another Meta-owned app, Threads.
Shares of Meta have steadily been climbing back this past year from a meltdown in 2022 that wiped out more than three-quarters of their one-time value, buoyed by investor excitement about artificial intelligence.
Read: Sheryl Sandberg steps down from Meta board
Its recovery has also been aided by a rebound in user growth and digital ad sales, as well as an austerity drive that saw it shed more than 21 000 employees since late 2022.
Revenue for the fourth quarter rose 25% to $40.1-billion, above the $39.2-billion analysts were expecting, according to LSEG data. Net income rose more than 200% to $14-billion, or $5.33/share, exceeding expectations of $4.97/share, according to LSEG data.
“This was one of the most impressive quarters – intrinsically and versus expectations,” said Evercore ISI analyst Mark Mahaney.
The strong results came after fellow digital ads heavyweight Alphabet (Google) posted holiday season advertising sales that came in below expectations.
Improvements to the social media business have made investors more tolerant of Meta’s undiminished spending, as it pours billions of dollars into “metaverse” technologies and building out its artificial intelligence infrastructure. On Thursday executives doubled down on aggressive investments in both areas.
The company’s metaverse-orientated Reality Labs unit handily beat revenue expectations for the fourth quarter, posting record sales of $1.1-billion from “strong sales” of its Quest device over the holiday season, Zuckerberg told analysts after the report. Investors had been expecting $804-million, according to LSEG data.
Meta said it still expected operating losses for Reality Labs to “increase meaningfully” as it invests more in augmented and virtual reality in 2024.
While interactive and immersive experiences via those technologies remain the ultimate goal, Zuckerberg said the latest version of its Ray-Ban smart glasses, with a built-in AI assistant, has been an early surprise hit with consumers, too.
“We thought we would have to build full displays and holograms” before the smart glasses would become mainstream, he said. “And now it’s quite possible that … AI assistants built in will be the killer app.”
Advertising
Still, though improving, Reality Labs sales remain a tiny 2.7% slice of the company’s total revenue.
“Meta ended 2023 on an extremely strong note, with revenue soaring above analyst expectations,” said Debra Aho Williamson, an independent tech analyst and former principal analyst at eMarketer.
“The company can talk all it wants to about AI and the metaverse, but it’s still a social media company that gets nearly all its revenue from advertising, and advertisers still clearly love Meta.” — Katie Paul and Yuvraj Malik, with Sheila Dang and Noel Randewich, (c) 2024 Reuters
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