Meta users grow, but losses reach $13.7 billion in 2022, layoffs also expected

February 2, 2023  20:55

Meta's user base grew in 2022, pushing the company's stock price higher. But losses also increased, reaching $13.7 billion. The head of the company, Mark Zuckerberg, decided to improve the company's efficiency and cut unnecessary layers of managers.

Financial results

Despite all the problems and losses, the number of daily users of Meta increased and for the first time exceeded 2 billion, and after the publication of the financial results report for the fourth quarter of 2022, the company's shares rose by 20%. In addition, a $40 billion stock buyback was announced.

According to the report, Meta reported fourth-quarter revenue of $32.17 billion (versus $31.53 billion projected by Refinitiv). By comparison, the fourth-quarter 2021 revenue was $33.7 billion. On the one hand, revenue for the last quarter of the year exceeded analysts' expectations, but on the other hand, compared to the same period of the previous year, it decreased by 4%. Moreover, it has declined over the last 3 quarters.

However, the company's expenses rose 22% year-on-year to $25.8 billion.

Meta's operating profit was $6.4 billion, down 49% from a year earlier ($12.59 billion). Net income for the fourth quarter of 2022 was $4.65 billion, down 55% from the same period in 2021 ($10.29 billion).

Meta's revenue for 2022 was $116.61 billion, down 1% from 2021, but profits fell, with operating profit down 38% to $28.94 billion and net profit down 41% to $23.2 billion.

Along with all this, the number of daily users of the company's products increased.

  • The number of daily active users exceeded 2 billion for the first time in the company's history, while StreetAccount analysts expected only 1.99 billion.
  • The number of monthly active users was 2.96 billion.
  • Average revenue per user was $10.86, compared with StreetAccount analysts' forecast of $10.63.

Reality Labs Losses

According to Meta's fourth-quarter earnings report, Meta Reality Labs, a division specializing in virtual reality and meta-universe solutions, reported a loss of $4.28 billion last quarter and a loss of $13.72 billion for all of 2022 – Reality Labs posted a loss of $10.2 billion in 2021.

Reality Labs had revenues of $727 million in the fourth quarter and $2.16 billion for the full year 2022, which is even less than its 2021 figure of $2.27 billion. It turns out that the agency is losing six times as much as it is earning.

Mark Zuckerberg believes that one day there will be 1 billion people working in the meta-universe, and people will spend hundreds of dollars there. But the reality is that the meta-universe is still empty and unattractive to users. Despite this, the company plans to continue investing in its development. According to Meta CTO Andrew Bosworth, in 2023, the company will devote about 20 percent of its spending to funding Reality Labs.

Projections for 2023

In the first quarter of 2023, Refinitiv analysts believe Meta will have revenue of $27.1 billion, and the company forecasts revenue in the range of $26-28.5 billion.

The company's total spending in 2023 is projected to be $89 billion to $95 billion, versus the previous year's projection of $94 billion to $100 billion.

Capital spending is also likely to drop from $34-37 billion to $30-33 billion as Meta will spend less to build a new data center, choose a different architecture for it and optimize it for AI tasks.

Firing managers

Speaking to investors during Meta's earnings announcement, Mark Zuckerberg said he plans to make 2023 "the year of results" for the company.

He said the number of employees at the company (first Facebook and then Meta) had been growing for nearly two decades in a row, but that it had not been able to improve efficiency. But the company recently laid off 11,000 employees and stopped hiring, after which Zuckerberg said he focused on "improving decision-making efficiency."

He also said that he plans to flatten the company's organizational structure soon and eliminate several layers of middle managers to make decisions faster.

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