Meta shares surged over 20% on Friday, marking their third-best day ever, after the business disclosed a tripling of fourth-quarter profit and its first dividend.
- KEY POINTS.
- Meta shares rose on Friday as profits tripled in the fourth quarter and the firm declared its first dividend.
- Meta’s revenue increased 25% in the quarter, the greatest rate of growth since mid-2021, as the internet ad market revived.
- Investors hailed Meta’s plan to pay a dividend, an uncommon occurrence for a high-growth technology business.
Meta’s revenue increased 25% in the fourth quarter to $40.1 billion, up from $32.2 billion the previous year. This is the fastest rate of increase since mid-2021, and it provides another indication that the internet ad business is rebounding. Meta’s net income has more than tripled to $14 billion, up from $4.65 billion the previous year.
The company expects first-quarter sales to be between $34.5 billion and $37 billion. Analysts expected revenue of $33.8 billion.
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First-ever dividend
Meta announced on March 26 that it would pay its stockholders a quarterly dividend for the first time, at 50 cents per share. That comes as cash and equivalents increased to $65.4 billion at the end of 2023, up from $40.7 billion the year before. Meta has also announced a $50 billion share repurchase.
The stock rise on Friday increased Meta’s market capitalization by more than $200 billion, pushing its total valuation above $1.2 trillion. Investors applauded the dividend announcement as evidence of the company’s maturation. Ben Barringer, technology analyst at Quilter Cheviot, described it as a “symbolic moment and indicates what a turnaround story Meta has been on since its struggles in 2022.”
“Mark Zuckerberg is showing that he wants to bring shareholders along with him and is highlighting that Meta is now a mature, grown-up business,” Barringer wrote in a follow-up email.
Investors have also been watching Meta’s advances in artificial intelligence. The corporation has a stake in AI with its LLaMA big language model, which competes with Microsoft-backed OpenAI’s GPT-4. Barringer dubbed Meta a “closet AI winner” and stated that the company’s AI, while not on display, “will be better servicing advertisers and making the ads themselves more relevant for users.”
Meta CEO Zuckerberg has made a strong push for 2023 to be the company’s “year of efficiency”. Some investors have questioned the corporation’s large investments in the metaverse, which cost the company billions of dollars per quarter. Meta’s Reality Labs unit saw sales of $1 billion in the fourth quarter, but its virtual reality unit lost $4.65 billion.
Meta has reduced costs by over 20,000 jobs over the past year due to economic developments, Apple’s iOS upgrade, and rising interest rates. These steps appear to have paid off. Meta reported a tripling of its operating margin to 41%, and expenses fell 8% year on year to $23.73 billion.
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