Zuckerberg’s ‘Year Of Efficiency’ Nets Greatest Profits Ever

Topline

Meta just tallied its most profitable quarter—and year—ever, the Facebook parent revealed in its fourth-quarter earnings report, an impressive feat considering the company’s 2022 beating reflected in its stock’s record run-up in recent months, though scars remain from billionaire CEO Mark Zuckerberg’s panned pivot into the “metaverse.”

Key Facts

Meta’s $5.33 earnings per share during the fourth-quarter and $14.87 full-year profit per share were both the highest ever recorded by the company, beating respective analyst estimates of $4.82 and $14.81, according to FactSet.

The per share profit metrics are gaudier than reality due to Meta’s massive stock buybacks—the company’s 2023 net income of $39.1 billion fell short of 2021’s record $39.4 billion—but it still marks a rapid turnaround from Meta’s painful 2022, as the company’s earnings per share expanded 203% year-over-year in the three-month period ending last month.

Meta’s top line growth was also strong, as full-year revenue grew 25% to a record $40.1 billion, while fourth-quarter revenue was a record $134.9 billion, compared to forecasts of $39.1 billion (digital advertising accounts for about 98% of Meta’s sales).

Shares of Meta soared more than 10% shortly after the earnings report’s release as the company announced another $50 billion in stock buybacks and unveiled its inaugural cash dividend of $0.50 per share, to be paid out March 26.

Meta’s after-hours share price of about $440 implies a record market value for the company of about $1.1 trillion.

Tangent

Despite the dramatic recovery, Meta’s financials still include ghosts from the firm’s ugly 2021-2022 stretch when its stock fell more than 75% as Zuckerberg touted his company’s push into augmented and virtual reality. Meta’s Reality Labs segment, which encompasses its metaverse endeavors led by the Oculus headset, lost $4.6 billion last quarter, a 7% wider operating loss than Q4 2022. The augmented and virtual reality segment reported a $16.1 billion loss in 2023, worse than 2022’s $13.7 billion loss and comparing negatively to Meta’s social media arm’s $62.8 billion operating profit.

Contra

Wall Street is largely buying into Zuckerberg’s vision for Meta even as cash bleeds from Reality Labs. In a recent note to clients, JPMorgan analyst Doug Anmuth explained it’d be a boon for Meta if it can “simply lose less money” on the metaverse. Bank of America’s Justin Post noted Meta’s share price to earnings ratio excluding Reality Labs is far lower than the S&P 500’s, posing an “attractive core valuation” for Meta. Both Anmuth and Post have buy ratings for Meta shares, as do 81% of the analysts tracked by FactSet.

Key Background

Meta’s stock has surged more than 300% since bottoming out in November 2022, outgaining every stock listed on the S&P except for artificial intelligence darling Nvidia. Meta is no slouch in AI: Its generative AI large-language model “Llama” competes with those of Microsoft-backed OpenAI and Google, and it reportedly is furthering use of its own semiconductor chips to power its AI systems, a solution designed to reduce Meta’s reliance on AI chip market leader Nvidia. “AI will go across everything,” Zuckerberg told Forbes this fall.

Forbes Valuation

Zuckerberg is the fifth-richest person in the world with a net worth of about $140 billion, according to Forbes’ estimates, thanks largely to his 13% stake in Meta.

Further Reading

MORE FROM FORBESExclusive: Mark Zuckerberg On Meta’s Two Big Risky Bets-And Getting Punched In The Face
MORE FROM FORBESMeta Stock Sets Record High-How It Emerged From 77% Plunge And Metaverse Fiasco
MORE FROM FORBESMeta Earnings: Record Profits, Sales As Ads Stay Robust During Zuckerberg’s ‘Year Of Efficiency’

First appeared on www.forbes.com

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