MIAMI, FLORIDA – DECEMBER 3: A guest interacts with the Metaverse during Meta House at Miami Art Week on December 3, 2022 in Miami, Florida. (Photo by Tasos Katopodis/Getty Images for Meta)
Getty Images for Meta
Shares of Meta Platform soared on Wednesday after trading as the social media giant beat expectations for the fourth quarter. Free cash flow and a growing number of users on Meta’s apps were just what investors needed to justify Reality Labs’ big spending.
The shares traded as high as $180 after closing the regular session at $153.12 and have now doubled since crashing after the company disclosed dismal results in the previous quarter..
The company’s fourth-quarter revenue was $32.2 billion, higher than the $31.5 billion expected on Wall Street, though still down 4% from last year. Earnings per share (EPS), however, beat expectations of $2.26, coming in at $1.76, down 52% from a year earlier. The company attributed the poor results to restructuring costs that included layoffs and said that without those charges, EPS would have been $3.00.
But the key figure investors were looking for, according to Mark Shmulik, managing director and senior US internet analyst at investment manager and researcher AllianceBernstein, was free cash flow.
Free cash, money that can be used to reinvest in the business or pay dividends and share buybacks, was $5.3bn, significantly more than the $1.5bn expected, but still a staggering 58% less than in 2021.
Meta’s Reality Labs division, home to the metaverse Horizon World, performed slightly better than expected, with an operating loss of $4.3 billion instead of the expected $4.4 billion. This brought the division’s deficit for the year to $13.7 billion, up 34% from last year.
Supported by better-than-expected performance across the entire family of apps, including Facebook reaching 2 billion daily active users for the first time, the results are likely to limit investor objections to the company’s spending on the development of its metaverse.
“Our community continues to grow and I am pleased with the strong engagement in our apps. Facebook just reached the 2 billion daily active milestone,” said Mark Zuckerberg, founder and CEO of Meta, in a statement. Zuckerberg added that short-form videos (including Reels), an area where TikTok has gained market share, doubled from last year.
However, Reality Labs is still expected to remain unprofitable this year, according to chief financial officer Susan Li. “We continue to invest in the Reality Labs segment,” she said on a conference call to discuss the latest earnings.
Zuckerberg announced that Meta will launch its third-generation VR headset this year, expanding its virtual and mixed reality offerings. “Future operating platforms for the metaverse” will be a key focus, Zuckerberg said during the company’s earnings call.
“Most people will experience the metaverse on phones,” he added.
