Meta stock surges 14%. Investors are loving its first-ever dividend

By CNN Newsource

Published February 1, 2024 1:27 PM

By Clare Duffy, CNN

New York (CNN) — Meta’s “year of efficiency” paid off in a big way. And it offered a sweetener for investors, sending its stock surging.

The tech giant on Thursday reported that profit from the three months ended in December grew more than 200% year-over-year to $14 billion, exceeding Wall Street analysts’ expectations. Sales from the quarter grew 25% from the year-ago period to more than $40 billion.

The company also announced its first-ever cash dividend of $0.50 per share to be paid out on March 26 to shareholders of record as of February 22, as well as a $50 billion share buyback. Buybacks and dividends help to boost stock prices by rewarding investors with cash just for holding the stock — but they’re widely criticized for artificially inflating the stock price without spending on employees or improvements to the underlying business.

“We intend to pay a cash dividend on a quarterly basis going forward,” the company said in a release.

The news sent Meta (META) shares popping more than 14% in after-hours trading Thursday.

Thursday’s report marked the fourth quarter of Meta’s self-described “year of efficiency,” which Zuckerberg announced in February of last year. The turnaround strategy involved layoffs and other cuts to spending in what ended up being a stunningly successful effort to reverse the prior year’s revenue declines and share price weakness.

For the full year in 2023, Meta’s profits grew 69% year-over-year to $39 billion, the company reported Thursday. As of Thursday’s closing bell, Meta’s stock had gained 109% since this time last year.

Meta said Thursday that as of the end of 2023, it had “completed the data center initiatives and the employee layoffs, and substantially completed the facilities consolidation initiatives.”

“Our communities are growing and our businesses are back on track,” CEO Mark Zuckerberg said on a call with analysts Thursday evening. “A big thank you to all of our employees, partners, shareholders and everyone in our community for sticking with us and making 2023 such a success.”

Thursday’s report also comes one day after Zuckerberg appeared on Capitol Hill alongside industry peers to testify about the impact of the company’s platforms on young users. During the hearing, Zuckerberg issued a rare apology to parents of children who had been harmed by Facebook and Instagram who were in the room.

“No one should go through the things that your families have suffered, and this is why we invest so much and are going to continue doing industry-leading efforts,” Zuckerberg told parents.

The company said Thursday that its Facebook daily active users grew 6% year-over-year to more than 2.1 billion. But, in a move Meta had signaled previously, Meta CFO Susan Li said the company will no longer report Facebook user numbers — a sign of the company’s focus on its larger family of apps and, potentially, the smaller growth potential for Facebook given its already massive scale.

Going forward, Meta will report only daily active people on its family of apps, which reached an average of 3.19 billion in December, the company said.

Zuckerberg also noted Thursday that Threads — the rival to X, formerly Twitter, that Meta launched late last year — has reached 130 million monthly active users, indicating strong growth, although the platform remains smaller than competitors.

Another highlight from Thursday’s report was a 2% year-over-year jump in Meta’s average price per ad in the December quarter, a key indicator of the company’s core advertising business. The December quarter marked the first time last year that average price per ad grew rather than declined.

In the first quarter of 2024, Meta expects revenue of between $34.5 billion and $37 billion, a 20% year-over-year jump on the low end.

Meta details AI investment plans

Zuckerberg said late last year that artificial intelligence would be Meta’s biggest investment area in 2024, and the company on Thursday provided some clues about what that spending would look like.

Meta expects full-year capital expenditures to be between $30 billion and $37 billion — a $2 billion increase of the high end of the range it previously reported — which the company said would be driven by investments in AI and non-AI servers and data centers, including new data center construction. (Capital expenditures, broadly, are what a company spends on physical assets, such as factories or equipment.)

“Our updated outlook reflects our evolving understanding of our artificial intelligence (AI) capacity demands as we anticipate what we may need for the next generations of foundational research and product development,” the company said in Thursday’s release, adding that it expects “our ambitious long-term AI research and product development efforts will require growing infrastructure investments beyond this year.”

Meta last year rolled out new AI tools for brands in a move aimed at boosting its advertising business, which had taken a hit from Apple App Store privacy changes that went into effect in 2021. Li said that “initial adoption of these features has been strong” and that the AI ads investments would “remain a big area of focus for us in 2024.”

Zuckerberg also said earlier this month that Meta plans to build its own artificial general intelligence, known as AGI, in a sign of the company’s desire to continue to be a serious player in the AI arms race.

The company has also continued to invest heavily in its Reality Labs unit, which houses its investments in building the metaverse, Meta’s vision for an immersive form of the internet that relies on virtual and augmented reality.

In 2023, Meta posted a more than $16 billion loss for Reality Labs. Li said the company expects Reality Labs operating losses to increase “meaningfully” this year.