Updated with Friday stock price:

A solid earnings and revenue beat from Meta Platforms Inc. today catapulted the social networking company’s stock 20% higher in trading Friday, adding more than $200 billion to its market capitalization.

The strong results were backed by optimistic guidance for the quarter ahead. In addition, Meta announced that it will make its first-ever dividend payment to investors.

The company reported fourth-quarter earnings before certain costs such as stock compensation of $5.33 per share, coming in well ahead of the $4.96-per-share forecast by Wall Street. Revenue for the period jumped 25% from a year earlier, to $40.1 billion, beating the $39.18 billion analyst target quite comfortably. Moreover, Meta’s net income more than tripled to $14 billion, from $4.65 billion one year earlier.

Investors may also have been encouraged to see that Meta’s operating expenses fell by 8% from a year earlier, to $23.73 billion, while its operating margin doubled to 41%. Those are clear signs that the company’s cost-cutting measures introduced over the last year are having the desired effect of improving its profitability.

The company reported that it now has 2.11 billion daily active users, ahead of the 2.08 billion expected, and 3.07 billion monthly active users, versus the Street’s forecast of 3.06 billion. Meta said its average revenue per user came to $13.12 at the end of the quarter, versus the $12.81 forecast.

For the first time, Meta plans to pay a quarterly dividend to investors, and it also announced an expanded $50 billion share buyback program to further boost value for shareholders. The company said it will pay a dividend of 50 cents per share, bringing it in line with rivals such as Apple Inc., Microsoft Corp. and Oracle Corp., which all distribute regular payouts to shareholders.

The board said it will pay the cash dividend on a quarterly basis from here on out, subject to “market conditions.” The announcement comes after Meta revealed that its cash and equivalents totaled $65.4 billion at the end of 2023, up from $40.7 billion one year prior.

The jump in Meta’s share price continues a rally that began last year, when the stock almost tripled in value. In January, Meta’s shares continued along that path and were up 12% prior to today’s report, hitting a record price in January as its market capitalization swelled to a cool $1.2 trillion.

In a statement, Meta Chief Executive Mark Zuckerberg (pictured) said the company had a “good quarter” and that it has made “a lot of progress on our vision for advancing AI and the metaverse.”

The company expects more good results in the coming months. For the first quarter of fiscal 2024, the company is eyeing revenue of between $34.5 billion and $37 billion, well ahead of the Street’s target of $33.8 billion in sales.

On a conference call with analysts, Meta Chief Financial Officer Susan Li said e-commerce, entertainment and gaming were some of the biggest growth drivers during the quarter, adding that they will continue to deliver gains in the coming year.

The company’s ad business is also looking healthy, thanks in part to Chinese e-commerce firms that have boosted spending in order to reach global audiences. Chinese firms including Temu, operated by WhaleCo Inc., and Shein LLC, have reportedly been spending millions on Facebook and Instagram ads, and helped to ensure that China-based advertisers accounted for 10% of the company’s total ad sales.

According to Zuckerberg, the company’s ad business has been boosted by AI, enabling it to grow faster than its chief rival Google LLC. In its earnings report yesterday, Google parent Alphabet Inc. reported an ad revenue increase of 11%, which was slower than most analysts had hoped for.

The CEO also spoke about the company’s investments in artificial intelligence, where it is attempting to compete with rivals such as ChatGPT creator OpenAI. Meta will continue to invest billions into AI, adding to its headcount and building up its data center infrastructure to handle AI workloads.

Although investors are optimistic about the prospect of a return on Meta’s AI investments, there’s less enthusiasm for the company’s Reality Labs business unit, which has become an enormous money pit. In the quarter, Reality Labs delivered its biggest operating loss so far at $4.26 billion.

The metaverse division has now lost more than $42 billion since it was first formed in 2020, and that number will likely grow for the foreseeable future. In a statement, the company said it expects “operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality.”

The Reality Labs unit is focused on developing Meta’s Quest series of VR headsets and other metaverse-related products. Zuckerberg has previously said the metaverse is “the next frontier” and the “successor to the mobile internet,” but analysts remain skeptical of his ambitions.

Holger Mueller of Constellation Research Inc. said Meta has clearly turned the corner, having struggled somewhat during the early post-pandemic days. According to him, “a $10 billion increase in operating income and a three-times increase in profit-per-share is difficult for any company, let alone one of Meta’s size.”

But the analyst said investors will be worried about Meta’s metaverse ambitions, where it is now facing competition from Apple Inc. “The big question is what Meta will do next in the metaverse, where it is under pressure not only because of the losses but because Apple has come out with an alternative VR headset,” Mueller said. “Meta needs to respond, and so the focus there remains firmly on R&D.”

The report came just a day after Zuckerberg appeared at a Senate Judiciary Committee hearing Wednesday, where he faced some tough questions from lawmakers. At the hearing, Committee members accused the company of ignoring the severity of child exploitation on the company’s social media platforms. Parents at the hearing also criticized Meta and other social media platforms such as TikTok for implementing insufficient safety measures, and said their services have caused serious mental health issues for their children.

Zuckerberg apologized to those present, saying he was sorry for what the parents have gone through. “No one should have to go through the things that your families have suffered,” he said.

Photo: Robert Hof/SiliconANGLE