Meta’s stock rose Thursday after the company reported better than expected earningssaid it would buy back billions of dollars in its stock, and survived a court challenge to his ambitions in the so-called Metaverse.
Shares of the tech giant, which owns Facebook, Instagram and WhatsApp, rose more than 24 percent in what would be its biggest one-day gain in nearly 10 years. And it’s a massive move for a company of its size, adding about $100 billion in market value in a single day, or about as much as Citigroup’s entire market cap.
What is the metaverse and why is it important?
The origins. The word “metaverse” describes a fully realized digital world that exists beyond the one we live in. It was coined by Neal Stephenson in his 1992 novel Snow Crash and the concept was further explored by Ernest Cline in his novel Ready Player One.
After ending last year with a loss of more than 60 percent, Meta’s stock is up more than 50 percent this year as sentiment among tech investors brightened. The Nasdaq Composite, an index that includes many tech companies including Meta, is up almost 20 percent this year.
Here’s the latest on Meta:
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The company’s earnings exceeded expectations and it announced a major buyback plan. Revenue for the final three months of last year was just over $32 billion, down 4 percent year-on-year but ahead of analysts’ forecasts. On Wednesday, the company also said better-than-expected first-quarter sales and announced $40 billion in share buybacks after buying $28 billion of its own stock last year.
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Flat – and even slightly down – is the new top. Despite declining revenue, Meta’s core products like Facebook and Instagram still generated strong sales in a tough economic climate. That boosted sentiment on Wall Street regarding the business and staved off some of the more pressing concerns that Meta is in imminent danger from challengers like Apple, TikTok, or other social media companies — at least for now.
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Meta executives can cut costs when needed. For years, Meta has spent a lot of money on breakneck expansion, be it in the form of new offices, increasing headcount or future-oriented technology with no immediate plans to make money. But in its most recent quarter, the company proved that it can find areas to cut if forced to. Meta chief executive Mark Zuckerberg called 2023 “the year of efficiency” in an earnings call on Wednesday, including canceling a spate of office leases, redesigning data centers to cost less and laying off thousands of “managers, the managers.” administer”. Wall Street welcomed the moves.
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Meta can still bring new people to Facebook. The big blue Facebook app surpassed two billion daily active users for the first time last quarter, a huge milestone and shocking given the service’s already large scale. It’s a signal that competition from other social networks is tough, but people are quiet with Facebook.
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His virtual reality deal survived a legal challenge. On Wednesday, A federal judge refused the Federal Trade Commission’s request to block Meta from spending $400 million to acquire a virtual reality startup called Within, which marks a major legal victory for the company as it invests heavily in the Metaverse where Users work, play and consume content via virtual and augmented reality. (Less happy for Meta, a month before European regulators ruled that it had illegally coerced users to effectively accept personalized advertising, fined the company more than $400 million and potentially forced it to make costly changes to its ad business in the European Union.)
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Many challenges remain. Meta faces setbacks in digital advertising as customers rein in spending due to higher interest rates and inflation. The company is also struggling to attract users of newer apps like TikTok, the short-form video app Mr. Zuckerberg sees as one of his most formidable rivals. The billions that Meta is spending to pursue its founder’s vision of the Metaverse may not pay off.
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Meta laid off more than 11,000 employees in November. The company reduced its workforce by 13 percent in the round of layoffs, reflecting the the most significant job cuts since its inception in 2004. Meta incurred $4.2 billion in restructuring charges for the fourth quarter, including charges related to the early termination of office leases and employee severance payments. For 2023, the company expects further restructuring costs of one billion US dollars.
