Meta shares surge 20% on soaring profit, better-than-expected guidance and first-ever dividend

Meta shares closed up more than 20% on Friday after the company reported a tripling in fourth-quarter profit and issued its first-ever dividend.

Revenue rose 25% in the fourth quarter for Meta to $40.1 billion from $32.2 billion a year earlier. That’s the fastest rate of growth for any period since mid-2021, and offers further evidence that the online ad market is continuing to rebound. Meta’s net income more than tripled, to $14 billion from $4.65 billion a year earlier.

The company is forecasting first-quarter sales to be in the range of $34.5 billion to $37 billion. Analysts were expecting revenue of $33.8 billion. 

Meta said it would pay investors a quarterly dividend for the first time, announcing a payout of 50 cents a share on March 26. That comes after cash and equivalents swelled to $65.4 billion at the end of 2023, from $40.7 billion a year earlier. Meta also announced a $50 billion share buyback.

The stock rally on Friday added more than $200 billion to Meta’s market cap and pushed its total valuation past $1.2 trillion.

Investors praised the dividend announcement as a sign of the company’s maturity.

Ben Barringer, technology analyst at Quilter Cheviot, said it represented a “symbolic moment and indicates what a turnaround story Meta has been on since its struggles in 2022.”

“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,” Barringer said in emailed comments.

Investors have also been focusing on Meta’s moves in artificial intelligence. 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.

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

Meta CEO Zuckerberg made a big push for 2023 to be a “year of efficiency” for the company.

Some investors have questioned the company’s hefty investments in the metaverse, which is costing the company billions of dollars a quarter. Sales in Meta’s Reality Labs unit passed $1 billion in the fourth quarter, but virtual reality unit recorded $4.65 billion in losses.

Meta has been deep in cost-cutting mode, including cutting over 20,000 jobs over the last year or so, in response to changes in the economic environment, Apple’s iOS update and rising interest rates.

Those steps appear to have paid off. Meta reported a doubling of its operating margin to 41%, and the company’s expenses decreased 8% year over year to $23.73 billion.

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