The final earnings report published by Meta for 2022 indicated that the social media company’s net income declined 41% over the course of the year, prompting executives to announce efficiency improvements in comments that appear to have restored investor confidence.
Meta reported $116.6 billion in revenues, marking a 1% decline from the $117.9 billion earned in 2021. A somewhat higher effective tax rate and a 23% increase in costs from operations contributed to the rapid decline in net income, according to the earnings report.
The company reported operating losses of $13.7 billion from Reality Labs, the business unit focused on developing hardware and software products for the metaverse, representing more severe losses than the $10.2 billion reported in 2021. The Family of Apps business unit, which includes social media platforms Facebook, Messenger, Instagram, and WhatsApp, reported $42.7 billion in income, constituting a decline from $56.9 billion in the previous year.
Meta CEO Mark Zuckerberg has invoked criticism for the decline in profitability. Altimeter Capital Management CEO Brad Gerstner recently wrote the executive a letter encouraging him to reduce spending on metaverse initiatives and significantly reduce headcount, which has more than tripled from 25,000 employees to 85,000 employees over the past four years.
“It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people,” he said. “These incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion.”
Meta CTO Andrew Bosworth likewise admitted in a blog post that the company’s culture has drastically changed in recent years. He recounted that Zuckerberg would reject suggestions that the firm support various nonprofits or causes out of a concern that the initiatives would distract from their overall mission; Meta now devotes considerable resources toward sustainability and community support efforts.
“Resources and time were so tight that you could feel the weight of all the things you weren’t working on,” Bosworth wrote. “You had real conviction that the thing you were doing was the most important thing.”
Zuckerberg dismissed 13% of his company’s workforce in the weeks after he received the letter from Gerstner. The entrepreneur remarked during an earnings call that he has designated 2023 as the “Year of Efficiency” and informed investors that the company would take additional efforts to streamline operations.
“We are going to be more proactive about cutting projects that aren’t performing or may no longer be as crucial. But my main focus is on increasing the efficiency of how we execute our top priorities,” he commented. “So I think that there is going to be some more that we can do to improve our productivity, speed, and cost structure. And by working on this over a sustained period, I think we will both build a stronger technology company and become more profitable.”
Shares for Meta increased more than 20% after the reassurances from Zuckerberg, suggesting that investors were heartened by the emphasis on efficient operations. The company had underperformed the overall stock market last year alongside the rest of the technology sector.