Meta's Ad Business Is Still Expanding

Meta’s Ad Business Is Still Expanding

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Meta’s CEO, Mark Zuckerberg, is set to pocket $175 million from the company’s first-ever dividend, benefiting top shareholders too.

Mark Zuckerberg surprised everyone last week by apologizing during the Senate’s online kid safety session. A few days later, he made another announcement that Meta would pay out its first dividend, making some stockholders extremely wealthy.

Surge in revenue

After the firm announced a tripling of its fourth-quarter profit and paid out its first-ever dividend, Meta shares ended the day higher than 20%.

For Meta, revenue increased by 25% in the fourth quarter to $40.1 billion from $32.2 billion in the same period last year.

This is the fastest growth rate recorded since mid-2021, and it provides more proof that the Internet ad business is still expanding. In comparison to the previous year, Meta’s net income more than tripled to $14 billion from $4.65 billion.

According to the company’s prediction, first-quarter sales will fall between $34.5 billion and $37 billion. Analysts had projected $33.8 billion in revenue.

Initial dividend

Significantly, Meta announced that it would pay out a quarterly dividend to investors. On March 26, the payout will be 50 cents per share. This comes as cash and equivalents increased from $40.7 billion to $65.4 billion at the end of 2023. Meta also declared a $50 billion share repurchase.

With Friday’s stock surge, Meta’s market capitalization increased by almost $200 billion, and its overall valuation surpassed $1.2 trillion.

The dividend announcement was warmly welcomed by investors.

According to Ben Barringer, a technology analyst at Quilter Cheviot, it was a “symbolic moment that illustrates the journey Meta has taken since its difficulties in 2022.” He continued by saying in emailed comments that Mark Zuckerberg is showing that he wants to bring shareholders along with him and is highlighting that Meta is now a mature, grown-up business.

Additionally, investors have also been focusing on Meta’s moves in artificial intelligence (AI). The company has a stake in the ground in AI with its LLaMA large language model, a competitor to Microsoft-backed OpenAI’s GPT-4.

Moreover, Barringer called Meta a “closet AI winner” and said the company’s AI, while not out in the show, “will be better-servicing advertisers and making the ads themselves more relevant for users.”

Results from the ‘Year of Efficiency’

About a year ago, Meta CEO Zuckerberg told analysts on an earnings call that the management had chosen 2023 to be a “year of efficiency” for the company.

However, the company’s huge investments in the metaverse have been questioned by some investors. This is because these investments cost the company billions of dollars a quarter. Meta’s Reality Labs unit passed $1 billion in sales in the fourth quarter, but the virtual reality unit recorded $4.65 billion in losses ahead of Vision Pro.

In response to changes in the economic environment, Apple’s update, and rising interest rates, over 20,000 jobs were cut in Meta. Those steps appear to be yielding benefits. The company’s expenses decreased 8% year over year to $23.73 billion, while Meta reported a doubling of its operating margin to 41%.

In other related reports, Meta is filing a lawsuit at the General Court in Luxembourg for a supervisory fee imposed by the European Commission under the bloc’s Digital Services Act (DSA).

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