NEW YORK: Meta Platforms Inc’s stricter cost controls this year and a new US$40bil share buyback sent shares soaring on Wednesday, as chief executive officer Mark Zuckerberg called 2023 the “Year of Efficiency.”

The parent of Instagram and Facebook cut its cost outlook for 2023 by US$5bil to a range of US$89bil-US$95bil , and projected first-quarter sales that could beat Wall Street estimates.

Meta stock surged nearly 19% in after-hours trade. If gains hold yesterday, it would set up the shares for their biggest intraday surge in a decade and add more than US$75.5bil to its existing US$401bil market capitalisation.

Chief executive Mark Zuckerberg described the focus on efficiency as part of the natural evolution of the company, calling it a “phase change” for an organisation that once lived by the motto “move fast and break things.”

“We just grew so quickly for like the first 18 years,” Zuckerberg said in a conference call. “It’s very hard to really crank on efficiency while you’re growing that quickly. I just think we’re in a different environment now.”

The cost cuts reflect Meta’s updated plans for lower data centre construction expenses this year as the company shifts to a structure that can support both artificial intelligence (AI) and non-AI work, it said in a statement.

The digital ad giant faced a brutal 2022 as companies cut back on marketing spending due to economic worries, while rivals like TikTok captured younger users and Apple Inc’s privacy updates continued to challenge the business of placing targeted ads.

Meta in November cut more than 11,000 jobs in response, a precursor to the tens of thousands of layoffs in the tech industry that followed.

“Our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization,” Zuckerberg said in a statement.

Monetisation efficiency for Reels on Facebook had doubled in the past six months and the business was on track to roughly break even by the end of 2023 or early 2024 and grow profitably after that, he said on the conference call.

“Meta’s better-than-feared results should refute concerns over the state of the digital advertising industry following Snap’s horrible guidance earlier this week,” said Jesse Cohen, senior analyst at Investing.com.

Shares of peer Alphabet Inc were up 3.3% and Snap Inc stock rose 1% in after-hours trade on Wednesday.

“Despite all the challenges Meta must deal with, there are signs the business is still doing well,” Cohen said.

Meta’s forecast suggests that its investments in AI-surfaced content and TikTok short video competitor Reels are starting to pay off and that the advertising market may be recovering as companies increase their marketing budgets.

The company forecast first-quarter revenue between US$26bil and US$28.5bil , compared with analysts’ average estimates of US$27.14bil , according to Refinitiv.

Net income for the fourth quarter ended Dec 31, however, fell to US$4.65bil , or US$1.76 per share, compared with US$10.29bil , or US$3.67 per share, a year earlier.

Analysts expected a profit of US$2.22 per share.

The decline was largely due to a US$4.2bil charge related to cost-cutting moves such as layoffs, office closures and an overhaul of the company’s data center strategy.

 - Reuters