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Meta (Nasdaq: META), formerly Facebook, recently announced its fourth-quarter results that blew past market expectations. The company’s restructuring efforts continue to bear fruit as it surged past both revenue and profit expectations and announced its first-ever dividend payout.

Meta’s Financials

Meta’s Q4 revenues grew 25% to $40.11 billion, and earnings grew 203% to $5.33 per share. The market was looking for revenues of $39.18 billion and an EPS of $4.96. The online ad market rebound helped it deliver one of the fastest rate of growth for any period since mid-2021.

Its expense restructuring efforts resulted in a reduction of 8% in total expenses, more than doubling its operating margin to 41%. It ended the year with a headcount of almost 67,320, which was 22% lower than a year ago. It announced its first ever dividend payout of $0.50 per share.

Among key metrics, daily active user (DAU) numbers for the core Facebook app grew 6% to 2.11 billion, ahead of the market’s estimated 2.08 billion. Monthly active users (MAU) grew 3% to 3.07 billion, also ahead of the expected 3.06 billion. Average revenue per user was $13.12 compared to the analyst estimate of $12.81.

The growth in the quarter was driven by increased advertising spending. For the quarter, ad impressions delivered increased by 21% and the average price per ad increased by 2%. Part of the online spend increase was driven by Chinese retailers, with Temu and Shein increasing their ad spending on Facebook and Instagram. Revenue from China-based advertisers accounted for 10% of sales for the year and grew 5 percentage points over the year.

Meta ended the year with revenues growing 16% to $134.9 billion and a net income of $14.87 per share compared to $8.59 a year ago.

For the current quarter, Meta expects revenues to be in the range of $34.5-$37 billion, compared with the $33.8 billion average analyst estimate.

Meta’s AI Plans

For the coming year, Meta remains focused on AI and virtual reality. It had launched its own Large Language Model (LLM) last year under the title Llama 2. Llama 2 is a fully open sourced LLM and Meta plans to keep it like that as it wants it to become the most popular LLM among developers to attract better talent. Meta is working on the next upgrade to Llama, and Llama 3 is already in training and will have significant integrations into its family of apps that include Facebook, WhatsApp, Instagram, and Threads.

Meta wants to be able to provide an AI assistant that could be adopted by businesses, consumers, and developers so that it could compete better with the premium AI assistant subscription tools from Google and Microsoft. It plans to continue to invest in AI both in the form of headcount and technology.

It recently announced that it was purchasing $9 billion worth of Nvidia chips in the year to build up its AI initiatives. AI will be used to improve advertising campaigns, increase advertising revenue, and support new products such as AI chatbots.

This was also a big quarter for the metaverse and the Reality Labs segment. The segment crossed $1 billion in revenues for the first time in the quarter. It continues to be a loss-making segment and has reported a $4.6 billion operating loss for the period. The recent launch of Apple’s Vision Pro headset is expected to add more competition to the segment. While Vision Pro’s price tag of $3,500 is significantly higher than Meta’s price tag of $500 for the headset, analysts expect that Apple could still steal nearly 4% of the market share for the headset. Meta’s Quest 3 headset does not contribute any sizeable share of Meta’s revenue as of date.

Recent tech industry results showcase the return of online advertising. But Meta’s performance in the industry has been stronger than most others. For the recently reported quarter, Google’s ad revenues improved 11% compared with Meta’s 24% growth, and Amazon’s 27% growth. Compare this to a year ago when both Google and Meta had reported a drop of 4% in the online ad revenues. Google still remains the biggest player with $68.7 billion in ad revenues compared with Meta’s comparatively modest $38.7 billion. But Meta appears to be chipping away at Google’s ad share.

Meta’s stock is trading at $468.90 with a market capitalization of $1.2 trillion. It hit a 52-week high of $485.96 soon after results announcement last week. It was trading at a 52-week low of $167.66 a year ago.

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