Mark Zuckerberg is extending his “year of efficiency” indefinitely because he is so happy with it.
After Meta revealed fourth-quarter financials that easily exceeded analysts’ projections, Zuckerberg stated he wanted to “keep things lean” and has no plans to increase hiring on Thursday’s earnings call.
The company’s headcount, which peaked well over 86,000 in 2022, decreased 22% to 67,317 last year as a result of massive expense reductions implemented by Meta to pacify investors who had lost faith in the company’s capacity to adapt to shifting market conditions. At the time, Apple’s 2021 iOS upgrade was still having an impact on Meta, and the digital ad industry remained competitive.
During an earnings call exactly a year prior, Zuckerberg informed analysts that the management’s focus for 2023 will be the “year of efficiency.”
Since then, Wall Street has rewarded him. The stock nearly tripled in value in the previous year, ranking second in the S&P 500 behind only Nvidia. Last month, it broke a record, and the market capitalization of Meta has already surpassed $1 trillion due to the ongoing upswing.
Meta revealed on Thursday that its fourth-quarter sales increased by 25% to $40.1 billion, the quickest rate of growth since mid-2021. Operating margin more than doubled to 41%, and net income shot up a massive 201% to $14 billion. Throughout prolonged trading, the stock rose 15%.
When all things are considered, Meta is demonstrating that it can develop at a healthy rate and drastically reduce costs—which decreased by 8% from the previous year. The firm is so sure of its financial standing that it approved a $50 billion share purchase and announced it would pay a 50-cent quarterly dividend for the first time.
Not that Zuckerberg isn’t prepared to spend cash. All he wants to do is avoid doing it on humans.
During the call, Zuckerberg explained that his roadmap calls for creating a “world-class compute infrastructure,” which entails shelling out billions of dollars for the AI chips from Nvidia that Meta needs to train its models.
“We intend to win this game, so we’ll keep investing heavily in this space to create the most cutting-edge clusters,” Zuckerberg stated. “We’re also creating our own custom silicon that is tailored for our workloads and designing innovative data centers.”
“Even after 2024”
According to Meta, annual spending will range from $94 billion to $99 billion, up from $88.15 billion in 2023. Capital expenditures will be between $30 billion and $37 billion, according to finance chief Susan Li, “a $2 billion increase of the high end of our prior range.”
However, Zuckerberg stated that the era of rapid expansion is now in the past when it comes to employment. Zuckerberg stated that while Meta still intends to hire this year for high-paying technical positions, the headcount growth will be “relatively minimal compared to what we would have done historically.”
“I think it’s the right thing for us to do culturally to keep things lean until we get to a point where we’re just really underwater on our ability to execute,” he continued.
If Zuckerberg is to be believed, that’s not just a tale for this year.
“I kind of anticipate that for the foreseeable future, even after 2024,” he remarked.
In the meantime, Meta’s Reality Labs division, which is in charge of creating technologies for augmented and virtual reality, is still losing money and doesn’t seem to be stopping. The division has lost more than $42 billion since late 2020, with a record operational loss of $4.65 billion in the fourth quarter. Revenue surpassed $1 billion for the first time, primarily due to Quest VR headset sales.
The fact that Meta stated that losses at Reality Labs will “increase meaningfully year-over-year” highlights the persistence of Zuckerberg’s conviction that the metaverse will be the computing platform of the future.
Zuckerberg said that the significant cost reductions have allowed Meta to make “different investments where that’s necessary,” thus he is no longer worried about turning off potential investors
“To strengthen us as a technology company and provide us with the flexibility and stability to achieve the long-term objectives is the theme I outlined at the beginning of the year of efficiency last year,” he stated
