Meta is back on course for growth. After the parent company of Facebook had to accept a decline in sales for the first time in its history in 2022, it reported a plus again for the past quarter on Wednesday after the stock market closed. The numbers were better than expected overall, and the share price rose almost 12 percent in after-hours trading at times. The Meta share lost around two thirds of its value in 2022, but the price has increased significantly since the beginning of the year.
The good figures from Meta come a day after the software manufacturer Microsoft and the Alphabet holding company around the Internet company Google did better than expected with their results. Meta is providing another signal that the tech industry could be back on track after last year’s slowdown.
The fact that Meta is now growing again didn’t stop CEO Mark Zuckerberg from announcing a round of layoffs in March for the second time in just a few months. The company intends to lay off 10,000 other employees, and it was only in November that 11,000 jobs were cut. The first job cuts are now also reflected in the published employment figures. At the end of March, Meta had around 77,100 employees, three months earlier there were almost 86,500.
“Year of Efficiency”
Zuckerberg has declared 2023 the “Year of Efficiency”. With a view to the brightening of the business, he now said that the restructuring was increasingly taking place “from a position of strength”. Nevertheless, he wants to continue on his course, which includes slower hiring, creating flatter management structures and prioritizing projects “more rigorously”. This will “improve the pace and quality of our work.” Zuckerberg said the restructuring should be largely complete in May. After that, the environment for the employees will be “much more stable”, and Meta also wants to hire staff again.
In the first quarter, Meta increased its revenue by 3 percent to $28.6 billion, or 6 percent at constant currency. Analysts had expected an average of $27.7 billion, which would have corresponded to another drop in sales. Meta’s net income fell 24 percent to $5.7 billion. This is partially explained by restructuring charges of $1.1 billion recorded in the first quarter.
Difficult advertising business
Meta’s difficulties over the past few quarters can be explained in part by an adverse market environment in its advertising business, its main source of revenue. The group is also struggling with the increased competition from the smartphone app Tiktok. Also, tighter data rules on Apple devices are hampering the collection of user information, making it harder to tailor ads to individual users.
With regard to the second quarter, the company is also confident. It expects sales of $29.5 billion to $32.0 billion. At the upper end of this range, this would correspond to an increase of 11 percent compared to the previous year. For the company, that would be a very quick return to the double-digit growth rates it’s used to in the past.
Like Microsoft and Alphabet the day before, Meta, when presenting its figures, spoke about its initiatives around artificial intelligence (AI), an area that has had the entire tech industry in suspense since the release of the ChatGPT language model last fall. Zuckerberg said Meta is working across its product range on the use of so-called generative AI, which also includes systems like ChatGPT. As an example, he cited chat functions for the short message services Whatsapp and Messenger or visual tools for creating entries and ads on Facebook and Instagram.
Clinging to the Metaverse
Zuckerberg said that beyond its AI projects, Meta is also sticking to its strategy for the so-called Metaverse, which includes technologies like virtual reality. Although a “narrative” has developed that meta is moving away from the metaverse, this is not the case. Meta will continue to focus on both AI and the Metaverse.
The businesses around the metaverse are housed in the “Reality Labs” division and have so far caused high losses and comparatively little sales. In the first quarter, sales were $339 million and the operating loss was almost $4 billion, about $1 billion higher than a year ago.
