Meta Posts $4.2 Billion Restructuring Charge
Mark Zuckerberg, the chief executive of Meta, has spent months cutting costs at his company to appease investors, fix its flagging stock price and reshape the business. But first, he will have to pay up.
On Wednesday, Meta, the owner of Facebook, Instagram and WhatsApp, reported that it was taking a $4.2 billion restructuring charge for the fourth quarter. The charge included costs for the early termination of some office-space leases, redesigns of some data center projects and severance for employees who were laid off last year. The company expects another $1 billion in restructuring costs in 2023.
The charge dragged down Meta’s profits, with net income falling 55 percent to $4.65 billion in the fourth quarter from a year ago. Meta also continued to spend heavily on Mr. Zuckerberg’s shift to the so-called metaverse, with costs rising 22 percent from a year earlier.
Revenue fell 4 percent to $32.16 billion from a year earlier, coming in at the higher end of its guidance from last quarter and above Wall Street predictions. It also said it planned to rein in capital expenditures, largely by making changes to its data centers — which undergird Meta’s apps and infrastructure — and cutting back on the real estate required to run them. The company forecast revenue in the current quarter of $26 billion to $28.5 billion, exceeding Wall Street expectations.
“Our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization,” Mr. Zuckerberg said in a statement.
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Meta’s stock surged 18 percent in after-hours trading.
The results follow several quarters of slowing growth and a first-ever revenue decline last summer as Meta’s woes mounted. Like other tech companies, the social network has been battered by a difficult economic climate as inflation and interest rates have risen, causing marketers to rein in spending on digital advertising. War in Eastern Europe has also heightened uncertainty in the global economy.
Macroeconomic issues aside, Meta faces acute challenges. After 18-plus years of rocket-ship growth of user and revenue, the company runs the risk of churning through its longtime users as they depart for greener pastures found in newer apps like TikTok, the short-form video app. Mr. Zuckerberg considers TikTok one of his most formidable opponents.
Still, Facebook’s new users rose 4 percent in the fourth quarter, surpassing two billion daily active users for the app for the first time.
Meta also continues to feel the squeeze of Apple, which in recent years has put in place a series of privacy changes to its iOS software, hamstringing Facebook and Instagram’s ad-targeting abilities and causing the company to hemorrhage cash.
Perhaps Mr. Zuckerberg’s largest problem with shareholders is of his own making. He is pursuing his vision of the metaverse, a next-generation version of the internet he believes will connect different worlds, from augmented and virtual reality to different kinds of gaming worlds and other experiences. That work is being done at the company’s Reality Labs division, which is run by Mr. Zuckerberg’s longtime confidant and Meta’s chief technology officer, Andrew Bosworth, better known as Boz.
That was not a problem when Mr. Zuckerberg was putting up steady, reliable growth quarter after quarter. But given the high spending and difficult economic climate, analysts have raised concerns about the viability of Mr. Zuckerberg’s grandiose plans — concerns he has largely ignored.
“I think this is going to be a very important thing, and I think it would be a mistake for us to not focus on any of these areas, which I think are going to be fundamentally important to the future,” he said in a call with investors last year.
To make up for the continued spending on the metaverse, the company has spent the past six months trying to trim costs. It has largely cut perks and nonessential travel for employees. It cut 13 percent of its work force in November, eliminating the positions of roughly 11,000 of its employees, especially in the recruiting and business divisions.
Mr. Zuckerberg blamed the global economic slowdown for the layoffs. But he also blamed himself, in part, as he and other tech executives pointed to their overhiring exuberance in the early days of the pandemic. As the world was ordered to shelter in place, the pandemic brought with it a surge of people relying on online products and services more than ever before, which in turn caused tech companies to add new positions at a rapid clip.
Mr. Zuckerberg and others admitted they had been too quick to estimate that a largely digital life was the new reality for many, even as that reality shifted again with the advent of vaccines and as more people ventured back into the physical world more freely.
Mr. Zuckerberg has said Meta’s best days remain ahead of it. The company has invested in artificial intelligence in hopes of improving its business over time. Better A.I., he has said, will drive better content recommendations across the company’s marquee products — like Reels, the TikTok-like video feature inside of Instagram and Facebook — which in turn will result in people spending more time across its family of apps.