Meta returns to growth after struggling with falling sales

The debate over whether Meta is in decline may become quieted, at least for now.

After three straight quarters of falling revenue, Meta, the company formerly known as Facebook, reported on Wednesday that revenue for the first quarter jumped 3 per cent from a year earlier, to $28.6 billion. Profits fell 24 per cent, to $5.7 billion, partly because of restructuring charges.

The results, which surpassed Wall Street expectations and Meta’s own guidance, were bolstered by a growth in users. The company added 37 million daily users to Facebook, its marquee app, up 4 per cent from a year earlier and a turnaround from the first-ever drop in its users that it reported in early 2022.

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“We had a good quarter, and our community continues to grow,” Meta CEO Mark Zuckerberg said in a statement. He added that the company was “becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision.”

The performance comes amid a year of tumult for Meta, which is trying to revamp itself after experiencing declining revenue and what Zuckerberg has called an overstuffed workforce.

He has been moving the company into the so-called immersive world of the metaverse, an untested market. Meta also faces stiff competition from adversaries such as TikTok, which is taking advertising dollars away from social media companies, and Apple, which has put the screws to Facebook’s advertising technology with privacy updates to the iOS software.

Those challenges, after years of unbridled growth, have raised questions about Meta’s future and its vulnerabilities.

On Wednesday, Zuckerberg said in a call about the financial results that he had no intention of dropping his pursuit of the metaverse and that it remained a long-term goal.

In a turnaround attempt, he has instead embarked on what he calls a “year of efficiency” and has reined in spending and slashed employee ranks by more than 21,000, or roughly 30 per cent. Meta’s stock price, which rose more than 12 per cent in after-hours trading, has surged 63 per cent since the company announced a first round of 11,000 layoffs in November.

Meta announced 10,000 more layoffs in March. The company said Wednesday that it would incur severance and related personnel costs of about $1 billion from the cuts.

“When we started this work last year, our business wasn’t performing as well as I wanted,” Zuckerberg said in the call with investors. He added that he continued “to believe that slowing hiring, flattening our management structure” would improve the speed and quality of Meta’s work.

But those moves have also hurt employee morale. Workers are questioning whether they will be among the layoffs. Zuckerberg has said he is trying to eliminate “managers managing managers,” the result of a glut of middle management driven by overzealous pandemic-era hiring.

The company said it had 77,114 employees as of March 31, down 1 per cent from a year earlier.

Despite the latest results, Meta’s challenges remain. The company’s costs in the first quarter jumped 10 per cent from a year earlier, to $21.4 billion, outstripping revenue growth.

As hype for the metaverse has died and shifted to artificial intelligence, Meta is also trying to position itself as a leader in the field, drawing on years of investment. Zuckerberg and his executive team are attending weekly meetings focused on AI strategy. He has told investors that AI is helping to suggest more relevant photos and videos to Instagram and Facebook users.

Zuckerberg said he expected the new technology to “touch literally every single one of our products” in the future. He did not reveal specific plans, but speculated on potential products like AI-powered chatbots that could help customer service or small businesses that use WhatsApp. AI could also help make photos or videos more engaging, he said.

For now, Meta plans to continue investing heavily in data centers and infrastructure that help build up AI efforts, similar to other Big Tech companies.

“Our AI work is driving good results across our apps and business,” Zuckerberg said.