Overnight, the gods returned and the sky in Silicon Valley lit up again. On the day of the launch of Apple's first head display device, Vision Pro, the stock price of Meta, considered by the market as its main competitor, surged by over 20%, with a market value increase of over $200 billion in one day, setting a historical record for the US stock market. Behind the strong upward trend, Meta has indeed had an extraordinary year: the path of the metaverse has gone through twists and turns, and CEO Zuckerberg has never given up, still searching for various new directions; I boarded the AI Express, delivered the strongest financial report in history, and even offered my first dividend in history.
Record daily gains in US stocks
After Microsoft broke new records two weeks ago and became the second publicly traded company with a market value exceeding $3 trillion, Meta also ushered in its first shining moment in 2024. On February 2nd local time, Meta rose 23.10% during trading and closed at $474.99 per share, up 20.32%. Its total market value reached $1.22 trillion, an increase of nearly $200 billion in one day.
This is also the highest daily market value increase in the history of the US stock market. Previously, Apple's market value increased by $190.9 billion on November 10, 2022, Amazon by $190.8 billion on February 4, 2022, and Nvidia by $184.1 billion on May 25, 2023. Since hitting bottom in November 2022, Meta's stock price has soared by over 300%, surpassing all stocks in the S&P 500 index except Nvidia.
The strong rise of Meta this round is due to the post market financial report that exploded in the US stock market last Thursday. On the eve of Facebook's 20th anniversary, its parent company Meta released its strongest financial report in history, with Q4 performance and Q1 guidance exceeding Wall Street expectations. The financial report shows that Meta's revenue in the fourth quarter was $40.11 billion, a significant increase of 25% year-on-year, higher than analyst expectations of $39.01 billion.
The net profit for the fourth quarter was $14 billion, a three fold increase compared to the same period last year. In addition, Meta had a daily active user count of 2.11 billion in the fourth quarter, higher than analyst expectations of 2.07 billion; The monthly active users in the fourth quarter were 3.07 billion, higher than the analyst's expectation of 3.06 billion.
Cost saving and open source
The increase in profits naturally benefits from effective cost control. The data shows that Meta's total expenditure in the previous fiscal year was approximately $106.2 billion, in line with previous expenditure guidelines. Among them, several grand layoffs resulted in Meta reducing approximately 20000 employees and successfully reducing expenses in terms of manpower and benefits. However, due to the gradual increase in investment in innovative businesses such as AI in the second half of the year, research and development expenses are also returning to a growth trend.
Besides cost saving, open source has also had an effect. In Meta's business landscape, advertising is undoubtedly the most crucial element that has never changed over the years. The financial report shows that the revenue of Meta's advertising business in the past four quarters was 28.1 billion, 31.5 billion, 33.6 billion, and 38.7 billion US dollars respectively, with year-on-year growth of 4.1%, 11.9%, 23.5%, and 23.8%, respectively. It is also gradually entering a good period in the second half of the year, with growth rates steadily increasing.
In the second half of last year, the recovery of the Internet advertising market in the United States was visible to the naked eye, as evidenced by the performance of Google, Amazon and other major manufacturers. According to GroupM's report, the size of the US Internet advertising market will grow by about 5.1% year on year in 2023, and will maintain a similar growth rate this year.
Morgan Stanley's statistics show that over the past year, Meta's advertising business has seen both volume and price soar, with user growth leading to higher display times and giving the platform the confidence to raise fees. Among them, the advertising display volume in the second and third quarters increased by 34% and 31% year-on-year, respectively, which is the best performance since the second quarter of 2021.
For 2024, the management has developed a relatively active expenditure plan, with an estimated total expenditure of 94-99 billion US dollars and capital expenditure of 30-37 billion US dollars for the entire year. Prior to this, it was widely expected that its capital expenditure would be controlled within $32 billion.
With more assets, Meta also announced an increase of $50 billion in stock repurchases and its first-ever dividend payout. Meta's decision to pay a quarterly dividend of 50 cents per share shocked Wall Street. This means that Meta will be on par with its peers Apple, Microsoft, and Oracle.
In response, Evercore ISI analyst Mark Mahaney stated, "This is one of the most impressive quarters (financial reports), both fundamentally and compared to expectations." Several investment banks have also stated that the large dividend payouts indicate that the board is satisfied with the company's operating conditions, and Meta has definitely exceeded expectations in the past fiscal year to meet performance targets. Releasing this positive signal to the outside world is also beneficial for stimulating capital inflows and stabilizing shareholder confidence. For example, investment banks such as Goldman Sachs, Barclays, and Citigroup updated their research reports as soon as possible, raising the Meta target price to over $500.
Run at full speed into AI
What excites Wall Street is not just that - Meta, which had previously bet on a huge loss in the metaverse, is reviving on the AI track. Last July, Meta announced a deepening cooperation with Microsoft and officially launched the new generation open-source large language model Llama 2, which will be made available for commercial and research use for free. Zuckerberg said in a statement, "We have had a good quarter and our community and business continue to grow. We have made significant progress in advancing the vision of artificial intelligence and the metaverse."
According to Chen Jia, an independent international strategy researcher, after a strategic failure in the previous metaverse metaverse transformation, Zuckerberg was forced to achieve a secondary corporate strategic transformation through the open source of the new generation big model MLLM.
According to reports, Meta's generative artificial intelligence big language model Llama is further using its own chips to provide power. Zuckerberg also stated that the two existing AI research works (FAIR and GenAI) will be jointly advanced to "support our long-term goal of establishing universal intelligence, responsibly open source, and make it usable and useful for everyone in our daily lives.".
On the other hand, angel investor and senior artificial intelligence expert Guo Tao stated that Meta's Llama open source project will focus on a large number of small and medium-sized enterprises and a large number of users. Microsoft can expand the business scale of cloud services and infrastructure services such as Windows by deepening cooperation with Meta, further enhancing the competitiveness of cloud services; On the other hand, Microsoft's deepening cooperation with Meta can reduce the excessive reliance on OpenAI, integrate the technical advantages of both parties and form complementarity, accelerate the iteration and upgrading of new products, improve consumer satisfaction, and achieve high-speed performance growth.
According to previous reports, Meta is currently training Llama 3. By the end of this year, Meta will have approximately 350000 Nvidia H100 units, and if other GPUs are included, it will have approximately 600000 H100 equivalent computing power.
With the surge of Meta, Zuckerberg's wealth surged by $27 billion last Friday, currently reaching $169.5 billion, setting his own personal wealth record. On the Bloomberg Billionaires Index, he surpassed Bill Gates and rose to fourth place. In addition, due to Meta distributing dividends to investors for the first time, Zuckerberg will receive a dividend of approximately $700 million per year.
As Zuckerberg once said in an interview with Forbes magazine, "What determines fate is not your enemies, but your own actions.". Meta in the past year has fulfilled this principle with practical actions - Internet giants can only rely on themselves if they want to change their lives against the weather.