Profits slump 55% at Facebook owner Meta but shares surge 18%
>
Profits fall 55% at Facebook owner Meta, but shares rise 18% on positive outlook for Q1 revenue
Facebook owner Meta reported a 55 percent profit drop last night after wrapping up a tumultuous year in which its stock price plummeted.
It was the company’s first earnings report since it announced 11,000 layoffs in November.
But shares were up 18 percent in after-hours trading on a positive outlook for first-quarter sales.
The social media giant, which also owns Instagram and WhatsApp, said fourth-quarter profits had fallen to £3.8 billion, down from £8.3 billion a year earlier.
The result was hit by £3.4bn in restructuring costs linked to the decision to lay off staff and close some of its offices – and Meta warned of a further £800m in costs or more this year as its ‘efficiency efforts’ ‘ increase .
Breakdown: Facebook owner Meta announced 11,000 layoffs last November and at the time boss Mark Zuckerberg (pictured) had to admit: ‘I was wrong’
Revenues for the quarter registered a third consecutive drop, down 4 per cent, to £26 billion.
Meta said they expected to bring in £23bn for the current first quarter, higher than markets had expected.
That seemed to point to a recovery in demand for digital advertising after months of weak sales.
Investors were hoping for signs of a recovery after a horrific 2022, when Meta saw its share price fall by more than two-thirds.
Shares were up 27 percent year-to-date before last night. Markets were also cheered by a £32bn share buyback by the company.
Meta, like other tech giants, fared well during lockdowns as households spent more time online where advertisers tried to target them.
But with the world opening up again and a downturn looming, advertising budgets are under pressure.
At the same time, rising US interest rates last year hurt technology stocks whose massive valuations were largely based on the earnings they were expected to deliver going forward.
Higher rates make it less attractive to gamble on such growth bets.
The tech companies – including Microsoft, Amazon and Google-owned Alphabet – have cut tens of thousands of jobs in recent months.
Meta said last fall it would cut its workforce by about 13 percent in the first major job cut in its history.
Boss Mark Zuckerberg said the economic downturn and increased competition were one of the reasons revenues came in much lower than he expected.