Meta's fourth-quarter Earnings - The Ultimate Deep Dive


Meta Platforms Inc., formerly known as Facebook, announced better-than-expected results in its fourth-quarter earnings report, Resulting in a remarkable surge of more than 20% in meta shares. The company reported a remarkable 25% increase in revenue year-over-year and an impressive 201% increase in net income year-over-year. Mark Zuckerberg stated, "We had a good quarter as our community and business continue to grow. We've made a lot of progress on our vision for advancing artificial intelligence and the metaverse."

After a year of efficiency, revenue has increased by 25%.


During the announcement, Meta CEO Mark Zuckerberg highlighted the significance of 2023's operational efficiency, stating that the strategies implemented during the "year of efficiency" would become a permanent fixture within the company. Reinforcing this commitment to excellence and streamlined operations, Zuckerberg insisted that, henceforth, only the most outstanding individuals would have the opportunity to work at Meta. This emphasis on both efficiency and talent has resonated positively with investors, gauged by the company's latest financial results and subsequent surge in stock price. Let's examine the reasons behind the significant increase in revenue.

Meta has figured out its ads problem.


Despite Meta's dominance in online advertising, the digital giant faced challenges in its previously strong ad sales when Apple introduced privacy measures that affected user tracking on iOS devices. This move by Apple, allowing users to decline tracking, disrupted the ad machinery that Meta and the entire digital advertising ecosystem heavily relied on. The once seamless process of precise user targeting and accurate ad performance tracking was disrupted, resulting in reduced effectiveness and increased campaign costs for iOS users.

However, Meta demonstrated resilience and innovation by adapting its advertising platform to preserve the effectiveness of its ads despite Apple's privacy changes. The company's efforts to overhaul its ad delivery and measurement systems bore fruit, as evidenced by a 21% increase in ad impressions and a 2% rise in the average price per ad year-over-year. For the full year of 2023, the data is even more telling, with ad impressions up by a substantial 28% and, interestingly, the average price per ad decreased by 9% compared to the previous year. This indicates a strategic shift in Meta's ad pricing and placement, aimed at maintaining a high volume of effective ads while also optimizing costs. This balance between reach and pricing underscores Meta's agility in navigating market challenges and sustaining its advertising revenue stream.

The Meta Family of apps keeps growing!


Meta's ecosystem continues to experience user growth across its Family of apps. Notable statistics include a significant 8% year-over-year increase in daily active people (DAP), with an average of 3.19 billion for December 2023. On a monthly scale, the growth is similarly impressive, with Family monthly active people (MAP) reaching 3.98 billion as of December 31, 2023, marking a 6% increase compared to the previous year. Focusing on its flagship platform, Facebook's statistics are also commendable; Facebook's daily active users (DAUs) climbed to 2.11 billion in December 2023, up by 6% from the previous year. Meanwhile, Facebook's monthly active users (MAUs) grew to 3.07 billion as of December 31, 2023 — a 3% increase year-over-year. These figures underscore the sustained global appeal and engagement levels of Meta's social platforms.

Cost-cutting is working like a charm.


In early 2023, Mark Zuckerberg announced that Meta would focus on enhancing efficiency, leading to a strategic shift in reducing operational expenses. As part of this initiative, Meta undertook significant measures, scaling down its workforce to 67,317 employees, representing a year-over-year decrease of 22%. These cost-cutting efforts had a tangible impact on the financial overview, with Q4 expenses totaling $23.73 billion and $88.15 billion for the entire year. Despite concerted efforts in expense management, the numbers revealed an 8% decrease for the quarter and a marginal 1% annual increase. Notably, restructuring costs accounted for $1.15 billion in Q4 and $3.45 billion over the year, forming significant components of the overall expenses.

The Metaverse is still losing money, but no one cares.


Meta's endeavors into the metaverse, through its Reality Labs division, have reached a new financial milestone: surpassing $1 billion in revenue for the first time during the fourth fiscal quarter alone. This is a significant achievement for the segment, albeit overshadowed by a hefty $4.6 billion operating loss for the same period. The intensive investment strategy underscores Meta's commitment to this pioneering space despite the short-term losses associated with it.

The race in the virtual reality (VR) sphere is heating up as Apple (AAPL) is poised to unveil its Vision Pro headset this week. This new entrant poses a challenge to Meta's dominance, which stood at a 55% market share for VR headsets in the third quarter. Apple's high stakes in the battle are reflected in the companies' competing strategies: while the Vision Pro is priced at a premium of $3,500, Meta's Quest 3 is more affordable, starting at $500.

According to industry analysts at International Data Corp., the AR/VR headset market is expected to experience a slight downturn in 2023, with an anticipated decline of 8.3%. However, the market is expected to regain momentum and rebound in 2024. Despite this, investors in Meta are taking comfort in Mark Zuckerberg's revelation that the companion app for its VR headset was the most downloaded in the app store on Christmas Day, indicating strong consumer engagement with Meta's products and services.

$50 Billion Buybacks and first-ever dividend all at once.

In a surprising move that delighted investors, Meta announced an aggressive $50 billion stock buyback program along with their first-ever cash dividend payout. The declaration of a dividend payout, set at $0.50 per share of outstanding common stock, marks a new chapter for Meta, showcasing confidence in its financial stability and a willingness to share success with its shareholders. This has been positively received on Wall Street, signaling a strong commitment to providing shareholder value. Furthermore, the dividends are scheduled to be disbursed on March 26, 2024, to stockholders on record by February 22, 2024. Meta's board has indicated that subject to prevailing market conditions and board approval, the company plans to distribute cash dividends every quarter henceforth. This strategic move aligns Meta with other tech giants that regularly reward shareholders through dividends and buybacks.