Shares of Facebook and Instagram parent Meta Platforms Inc. soared in extended trading today as the company revealed the impact of recent cost-cutting measures it has implemented.

It also guided for higher revenue in the coming quarter than what analysts had forecast, while promising more share buybacks and further improvements in operational efficiency.

Meta reported fourth-quarter earnings before certain costs such as stock compensation of $1.76 per share, compared with $3.67 per share one year before. That came in lower than Wall Street’s forecast of $2.26 per share. All told the company posted a net profit of $4.65 billion, down from $10.2 billion a year earlier.

However, Meta did at least beat expectations on revenue. During the quarter it notched $32.17 billion in sales, down 4% from a year ago but above Wall Street’s forecast of $31.55 billion.

What really cheered up investors, though, was the company’s forecast for the coming quarter. Meta Chief Financial Officer Susan Li projected fiscal 2023 first-quarter sales of between $26 billion and $28.5 billion, the midpoint of which came in just above Wall Street’s forecast of $27.2 billion.

Meta’s stock gained more than 18% in the after-hours trading session, adding to a gain of more than 2% earlier in the day.

In a statement, Meta Chief Executive Mark Zuckerberg (pictured) hailed Facebook’s recent milestone of more than 2 billion daily active users. “The progress we’re making on our AI discovery engine and Reels are major drivers of this,” he said. “Beyond this, our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”

Zuckerberg explained what this meant in a call with analysts where he described the company’s plans and priorities for the immediate future, painting Meta as a company that’s intent on becoming leaner while growing faster than before.

“We’re going to be more proactive about cutting projects that aren’t performing or may no longer be as crucial,” the CEO told analysts. “But my main focus is on increasing the efficiency of how we execute our top priorities.”

Facebook surprised analysts by hitting its 2 billion-user milestone during the quarter, but in actual fact Meta counts almost 3 billion users across all of its apps, which include Instagram, WhatsApp and Messenger. Meta said its total daily active user base hit 2.96 billion, up 5% from a year ago.

The surprising growth in its user base is welcome, because Meta has been navigating some challenges recently. It’s facing increased competition from apps such as TikTok. It has also struggled with changes in Apple Inc.’s ad-tracking system that were introduced in late 2021 and hurt the efficiency of its ad targeting systems. Those changes are estimated to have caused Meta billions of dollars in revenue from ad sales, but Meta has responded by investing in artificial intelligence tools that can improve its ad targeting capabilities.

In addition, Meta recently announced plans to layoff thousands of workers as part of a wider cost-cutting campaign that includes canceling some new data center projects.

Those measures appear to be working out. Though Meta missed earnings forecasts, it pointed out that the costs associated with those layoffs and other restructuring charges totaled $4.2 billion, reducing its earnings per share by around $1.20.

Meta said it is now forecasting operating expenses of $89 billion to $95 billion in fiscal 2023, down from its previous guidance of $94 billion to $100 billion. Meanwhile, its capital expenditures are expected to drop to around $30 billion to $33 billion, down from its earlier forecast of $34 billion to $37 billion.

According to Li, these adjusted forecasts reflect “updated plans for lower data center construction spend in 2023 as we shift to a new data center architecture that is more cost-efficient and can support both AI and non-AI workloads.”

Meta further appeased shareholders with the news that its board of directors has approved an increase of $40 billion in share repurchases. In 2022, the company spent almost $28 billion on buying back its own shares, and still had around $11 billion earmarked for that purpose prior to today’s increase. Share repurchases generally can increase the price of a stock by reducing the number of shares outstanding.

The increased stock buyback plans apparently eased investors’ concerns over Meta’s continued multibillion-dollar investments in the metaverse — an immersive, digital world best experienced with a virtual reality headset — which Zuckerberg believes will one day become the primary way for people to interact with technology.

Holger Mueller of Constellation Research Inc. said Meta is doing well considering that it is now a company that’s in the middle of a transition. “It’s revenue shrank by just 1% from a year ago, while per share earnings were down 40%, that’s not too bad considering the changes that are afoot,” Mueller said. “Bumping up the stock repurchases from $27 billion to $40 billion has certainly helped with the share price, but investors will be watching keenly to see how the company is able to transition from making money from Facebook, to making money from the metaverse.”

Charles King of Pund-IT Inc. told SiliconANGLE that Meta’s revenue was better than expected and that it appeased investors with its focus on cost-cutting and containment measures. “These are subjects that are near and dear to shareholder’s hearts,” he said. “Plus, the announced $40 billion share buyback is much more investor-friendly than pouring billions into the metaverse, with little chance of near-term benefits. All in all, it sounds like Mark Zuckerberg may finally be paying attention to the adults in the room, rather than talking to his favorite mirror.”

That’s not to say Zuckerberg has given up on the metaverse. During the quarter, Meta’s Reality Labs business unit, which is responsible for its metaverse investments, reported an operating loss of $4.28 billion for the quarter, compared with a $3.3 billion loss one year ago.

Image: Anthony Quintano/Flickr