November 28, 2023

The debate over whether Meta is in decline may die down, at least for now.

After three straight quarters of declining revenue, the Meta company formerly known as Facebook, Report On Wednesday, first-quarter revenue rose 3% year-over-year to $28.6 billion. Profit fell 24 percent to $5.7 billion, partly due to restructuring charges.

The results beat Wall Street expectations and Meta’s own guidance, supported by subscriber growth. The company’s flagship app, Facebook, added 37 million daily users, up 4% from a year earlier, reversing the first user decline it reported in early 2022.

“We had a great quarter and our community continues to grow,” Meta CEO Mark Zuckerberg said in a statement, adding that the company is “getting more efficient so we can be more productive.” Make better products faster and put ourselves in a better position to realize our long-term vision.”

The performance comes amid a tumultuous year for Meta, which is trying to reinvent itself after falling revenue and what Mr Zuckerberg said was overcrowding.

He’s been taking the company into the immersive world of the so-called Metaverse, an untested market. Meta also faces stiff competition from rivals such as TikTok, which is taking ad revenue away from social media companies, and Apple, which has crippled Facebook’s ad tech with a privacy update to its iOS software.

The challenges raise questions about Meta’s future and its fragility after years of unbridled growth.

Speaking on a conference call Wednesday about the financial results, Mr. Zuckerberg said he had no intention of giving up on his pursuit of the Metaverse, which remains a long-term goal.

To turn things around, he embarked on what he called an “efficiency year” instead, reining in spending and cutting the workforce by more than 21,000 people, or about 30%. Meta’s shares rose more than 12 percent in after-hours trading and have soared 63 percent since the company announced its first round of 11,000 job cuts in November.

Meta announced another 10,000 job cuts in March. The layoffs will incur about $1 billion in severance and related personnel costs, the company said Wednesday.

“When we started this work last year, our business wasn’t performing as I would have liked,” Mr. Zuckerberg said on a conference call with investors. He added that he continues to “believe that slowing the pace of hiring and flattening our management structure” will increase the speed and quality of Meta’s work.

But the moves have also hit employee morale. Workers questioned whether they would be made redundant. Mr. Zuckerberg said he was working to eliminate “managers running managers”, the result of overzealous hiring in the pandemic era that led to a glut of middle managers.

The company said it had 77,114 employees as of March 31, down 1% from a year earlier.

Despite the latest results, challenges for Meta remain. The company’s first-quarter costs rose 10% from a year earlier to $21.4 billion, outpacing revenue growth.

As the hype around the Metaverse has faded and shifted toward artificial intelligence, Meta is also trying to use years of investment to position itself as a leader in the space. Mr. Zuckerberg and his management team participate in weekly meetings focused on AI strategy. Artificial intelligence is helping to recommend more relevant photos and videos to Instagram and Facebook users, he told investors.

Mr Zuckerberg said he expected the new technology to “touch literally every single one of our products” in the future. He didn’t reveal specific plans, but speculated about potential products, such as artificial intelligence chatbots that could help with customer service or small businesses using WhatsApp. AI could also help make a photo or video more engaging, he said.

For now, Meta plans to continue investing heavily in data centers and infrastructure to help build artificial intelligence, like other big tech companies.

“Our AI work is driving great results across our applications and business,” Mr. Zuckerberg said.

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