(Bloomberg) — Meta Platforms Inc.’s shares soared 19% in early trading after Chief Executive Officer Mark Zuckerberg announced plans to make the social media giant leaner, more efficient and more decisive.
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If the gains hold, Meta will record the biggest intraday jump since at least April and more than double its market value since Nov. 3 low.
Zuckerberg, who has spent the past year promising a faraway future in a digital world called the metaverse, was more focused on immediate problems, such as sending users the most relevant videos at the right time, and finally making significant revenue from messaging products. He called 2023 the “Year of Efficiency.”
“We’re working on flattening our org structure and removing some layers of middle management to make decisions faster, as well as deploying AI tools to help our engineers be more productive,” Zuckerberg said on an earnings call with investors on Wednesday. “There’s going to be some more that we can do to improve our productivity, speed and cost structure.”
Zuckerberg said the company is using AI to improve the way it recommends content — a strategy for making the platform more attractive to users and advertisers like it. Meta is still suffering from a slump in demand for digital ads, which makes up the vast majority of its sales, especially from clients in finance and technology. But the company also pointed to some industries, including health and travel, where businesses spend more.
Fourth-quarter sales fell 4% to $32.2 billion, the third straight period of declines. Even so, the total beat analysts’ estimates, and Meta projected revenue of $26 billion to $28.5 billion for the first quarter, in line with an average projection of $27.3 billion. Analysts are predicting that Meta will return to growth following the current period.
Snap Inc., the parent of rival social-media app Snapchat, gave a less upbeat outlook on Tuesday, sending its shares down 10%. Snap said it expected sales to decline in the current period, with CEO Evan Spiegel remarking that the ad slump appears to be bottoming out. “Advertising demand hasn’t really improved, but it hasn’t gotten significantly worse either,” Spiegel said on a conference call.
Read more: Snap CEO Spiegel Says Digital Advertising Slump Has Leveled Off
Meta, whose shares have gained 27% so far this year, is on the rebound after the worst year for its stock in history. The company faced a decline in advertiser demand due to weakness in the broader economy as well as a change in privacy rules on Apple Inc.’s iPhone, which made it harder for Meta to offer targeted ads. Meta cut 11,000 jobs, or 13% of the workforce, in November in its first-ever major layoff.
Those cuts came during a quarter that was otherwise an improvement for the company. Facebook, Meta’s flagship social network, now has more than 2 billion daily users, up more than 70 million from a year ago.
The company also boosted its stock-buyback authorization by $40 billion, adding to the $10.9 billion remaining from previous repurchase programs. In the fourth quarter, Meta recorded restructuring charges of $4.2 billion related to its job cuts.
Zuckerberg has spent tens of billions of dollars on an effort to build the metaverse — a digital world where people can work and play. Those efforts are still in their early stages, which means much of the investment is not leading to immediate returns.
Still, the Menlo Park, California-based company said 2023 expenses will be $89 billion to $95 billion — less than Meta previously forecast. That could help an ameliorate investor concern that the company is overspending on its virtual-reality ambitions.
Capital expenditures in the recent quarter soared to $32 billion. In the fourth quarter of 2021, by contrast, capital spending was $5.54 billion.
With assistance from Subrat Patnaik.
(Updates with early trading from first paragraph)
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