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Meta shares surge on better-than-expected revenue

Meta shares popped in extended trading on Wednesday after the company reported fourth-quarter revenue that topped estimates and announced a $40 billion stock buyback. Here are the results.

  • Earnings: $1.76 per share
  • Revenue:  $32.17 billion vs $31.53 billion expected, according to Refinitiv

The company also reported restructuring charges for its Family of Apps segment and Reality Labs unit of $3.76 billion and $440 million, respectively during the fourth quarter of 2022. Because of those charges, it’s difficult to compare the company’s earnings per share to analyst estimates of $2.22 per share.

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Here are some other key numbers:

  • Daily Active Users (DAUs): 2 billion vs 1.99 billion expected, according to StreetAccount
  • Monthly Active Users (MAUs):  2.96 billion vs 2.98 billion expected, according to StreetAccount
  • Average Revenue per User (ARPU): $10.86 vs $10.63 expected, according to StreetAccount

Revenue in the fourth quarter fell 4% from a year earlier, marking a third straight quarter of declining sales. The company’s cost and expenses ballooned 22% year-over-year to $25.8 billion.

Anwar Almojarkesh (L) and Alan Chalabi (R) from England take a photo at Meta (formerly Facebook) corporate headquarters in Menlo Park, California on November 9, 2022.

Josh Edelson | AFP | Getty Images

Meta said it expects revenue in the first quarter of between $26 billion and $28.5 billion.  Analysts were expecting sales of $27.1 billion, according to Refinitv. Sales in the first quarter of 2021 came in at $27.9 billion. Should Meta reach the high end of its guidance range, the company could end its streak of year-over-year declines.

“Our community continues to grow and I’m pleased with the strong engagement across our apps,” Meta CEO Mark Zuckerberg said in a statement. “Our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”

Meta said that its headcount increased 20% year-over-year to 86,482 as of December 31, 2022. That number includes a large chunk of the over 11,000 workers that Meta said it would lay off last November.

The company expects that its total expenses in 2023 will be in the range of $89 billion to $95 billion, which is lower than its prior outlook of $94 billion to $100 billion for the year. Meta attributed the adjustment to “slower anticipated growth in payroll expenses and cost of revenue.”

Meta also said that it’s lowering its capital expenditure estimates for the year to be in the range of $30 billion to $33 billion, down from $34 billion to $37 billion. That’s partly due to the company spending less money on data center construction. Instead, Meta said it’s shifting to a different kind of data center architecture intended to be more cost efficient while acting as the backbone of its various artificial intelligence projects.

Meta said on Wednesday that it authorized a $40 billion increase to its stock repurchase plan. The company bought back $27.9 billion worth of its shares last year.

Earlier this week, Snap reported fourth quarter earnings that missed on sales, sending its shares tumbling. While much smaller than Meta, Snap faces some of the same challenges, including a slowdown in online advertising spend, increased competition from TikTok and a weakened targeting advertising system due to Apple’s 2021 iOS privacy update.

Alphabet and Amazon will wrap up earnings reports from the major online ad platforms on Thursday, followed by Pinterest next week.

Meta shares plummeted by over 60% last year, as Zuckerberg struggled to sell Wall Street on his plan to pivot the company towards the yet-to-be-developed world of the metaverse. Zuckerberg has said the metaverse, which would include virtual reality and augmented reality technologies, could represent the next major way people interact.

The big bet has frustrated investors, who worry the company is putting too much focus on a futuristic endeavor while its core ad business struggles to revive growth. Meta’s Reality Labs unit, home to the metaverse ambitions, lost $4.28 billion in the fourth quarter, bringing its total operating loss for the year to $13.72 billion.

Meta said last year that “Reality Labs operating losses in 2023 will grow significantly year-over-year.”

WATCH: Snap shares plunge on weak revenue

Snap shares plunge on weak sales outlook despite earnings beat

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Microsoft AI chief Suleyman sees advantage in building models ‘3 or 6 months behind’

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Microsoft AI chief Suleyman sees advantage in building models ‘3 or 6 months behind’

Microsoft owns lots of Nvidia graphics processing units, but it isn’t using them to develop state-of-the-art artificial intelligence models.

There are good reasons for that position, Mustafa Suleyman, the company’s CEO of AI, told CNBC’s Steve Kovach in an interview on Friday. Waiting to build models that are “three or six months behind” offers several advantages, including lower costs and the ability to concentrate on specific use cases, Suleyman said.

It’s “cheaper to give a specific answer once you’ve waited for the first three or six months for the frontier to go first. We call that off-frontier,” he said. “That’s actually our strategy, is to really play a very tight second, given the capital-intensiveness of these models.”

Suleyman made a name for himself as a co-founder of DeepMind, the AI lab that Google bought in 2014, reportedly for $400 million to $650 million. Suleyman arrived at Microsoft last year alongside other employees of the startup Inflection, where he had been CEO.

More than ever, Microsoft counts on relationships with other companies to grow.

It gets AI models from San Francisco startup OpenAI and supplemental computing power from newly public CoreWeave in New Jersey. Microsoft has repeatedly enriched Bing, Windows and other products with OpenAI’s latest systems for writing human-like language and generating images.

Microsoft’s Copilot will gain “memory” to retain key facts about people who repeatedly use the assistant, Suleyman said Friday at an event in Microsoft’s Redmond, Washington, headquarters to commemorate the company’s 50th birthday. That feature came first to OpenAI’s ChatGPT, which has 500 million weekly users.

Through ChatGPT, people can access top-flight large language models such as the o1 reasoning model that takes time before spitting out an answer. OpenAI introduced that capability in September — only weeks later did Microsoft bring a similar capability called Think Deeper to Copilot.

Microsoft occasionally releases open-source small-language models that can run on PCs. They don’t require powerful server GPUs, making them different from OpenAI’s o1.

OpenAI and Microsoft have held a tight relationship shortly after the startup launched its ChatGPT chatbot in late 2022, effectively kicking off the generative AI race. In total, Microsoft has invested $13.75 billion in the startup, but more recently, fissures in the relationship between the two companies have begun to show.

Microsoft added OpenAI to its list of competitors in July 2024, and OpenAI in January announced that it was working with rival cloud provider Oracle on the $500 billion Stargate project. That came after years of OpenAI exclusively relying on Microsoft’s Azure cloud. Despite OpenAI partnering with Oracle, Microsoft in a blog post announced that the startup had “recently made a new, large Azure commitment.”

“Look, it’s absolutely mission-critical that long-term, we are able to do AI self-sufficiently at Microsoft,” Suleyman said. “At the same time, I think about these things over five and 10 year periods. You know, until 2030 at least, we are deeply partnered with OpenAI, who have [had an] enormously successful relationship for us.

Microsoft is focused on building its own AI internally, but the company is not pushing itself to build the most cutting-edge models, Suleyman said.

“We have an incredibly strong AI team, huge amounts of compute, and it’s very important to us that, you know, maybe we don’t develop the absolute frontier, the best model in the world first,” he said. “That’s very, very expensive to do and unnecessary to cause that duplication.”

WATCH: Microsoft Copilot beginning of a seismic shift in AI integration, says Microsoft AI CEO Suleyman

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Former Microsoft CEO Steve Ballmer says, as shareholder, tariffs are ‘not good’

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Former Microsoft CEO Steve Ballmer says, as shareholder, tariffs are 'not good'

President Trump’s new tariffs on goods that the U.S. imports from over 100 countries will have an effect on consumers, former Microsoft CEO Steve Ballmer told CNBC on Friday. Investors will feel the pain, too.

Microsoft’s stock dropped almost 6% in the past two days, as the Nasdaq wrapped up its worst week in five years.

“As a Microsoft shareholder, this kind of thing is not good,” Ballmer said, in an interview with Andrew Ross Sorkin that was tied to Microsoft’s 50th anniversary celebration. “It creates opportunity to be a serious, long-term player.”

Ballmer was sandwiched in between Microsoft co-founder Bill Gates and current CEO Satya Nadella for the interview.

“I took just enough economics in college — that tariffs are actually going to bring some turmoil,” said Ballmer, who was succeeded by Nadella in 2014. Gates, Microsoft’s first CEO, convinced Ballmer to join the company in 1980.

Gates, Ballmer and Nadella attended proceedings at Microsoft’s Redmond, Washington, campus on Friday to celebrate its first half-century.

Between the tariffs and weak quarterly revenue guidance announced in January, Microsoft’s stock is on track for its fifth straight month of declines, which would be the worst stretch since 2009. But the company remains a leader in the PC operating system and productivity software markets, and its partnership with startup OpenAI has led to gains in cloud computing.

“I think that disruption is very hard on people, and so the decision to do something for which disruption was inevitable, that needs a lot of popular support, and nobody could game theorize exactly who is going to do what in response,” Ballmer said, regarding the tariffs. “So, I think citizens really like stability a lot. And I hope people — individuals who will feel this, because people are feeling it, not just the stock market, people are going to feel it.”

Ballmer, who owns the Los Angeles Clippers, is among Microsoft’s biggest fans. He said he’s the company’s largest investor. In 2014, shortly after he bought the basketball team for $2 billion, he held over 333 million shares of the stock, according to a regulatory filing.

“I’m not going to probably have 50 more years on the planet,” he said. “But whatever minutes I have, I’m gonna be a large Microsoft shareholder.” He said there’s a bright future for computing, storage and intelligence. Microsoft launched the first Azure services while Ballmer was CEO.

Earlier this week Bloomberg reported that Microsoft, which pledged to spend $80 billion on AI-enabled data center infrastructure in the current fiscal year, has stopped discussions or pushed back the opening of facilities in the U.S. and abroad.

JPMorgan Chase’s chief economist, Bruce Kasman, said in a Thursday note that the chance of a global recession will be 60% if Trump’s tariffs kick in as described. His previous estimate was 40%.

“Fifty years from now, or 25 years from now, what is the one thing you can be guaranteed of, is the world needs more compute,” Nadella said. “So I want to keep those two thoughts and then take one step at a time, and then whatever are the geopolitical or economic shifts, we’ll adjust to it.”

Gates, who along with co-founder Paul Allen, sought to build a software company rather than sell both software and hardware, said he wasn’t sure what the economic effects of the tariffs will be. Today, most of Microsoft’s revenue comes from software. It also sells Surface PCs and Xbox consoles.

“So far, it’s just on goods, but you know, will it eventually be on services? Who knows?” said Gates, who reportedly donated around $50 million to a nonprofit that supported Democratic nominee Kamala Harris’ losing campaign.

— CNBC’s Alex Harring contributed to this report.

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AppLovin can offer TikTok ‘much stronger bid than others,’ CEO says

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AppLovin can offer TikTok 'much stronger bid than others,' CEO says

Piotr Swat | Lightrocket | Getty Images

AppLovin CEO Adam Foroughi provided more clarity on the ad-tech company’s late-stage effort to acquire TikTok, calling his offer a “much stronger bid than others” on CNBC’s The Exchange Friday afternoon.

Foroughi said the company is proposing a merger between AppLovin and the entire global business of TikTok, characterizing the deal as a “partnership” where the Chinese could participate in the upside while AppLovin would run the app.

“If you pair our algorithm with the TikTok audience, the expansion on that platform for dollars spent will be through the roof,” Foroughi said.

The news comes as President Trump announced he would extend the deadline a second time for TikTok’s Chinese-owned parent company ByteDance to sell the U.S. subsidiary of TikTok to an American buyer or face an effective ban on U.S. app stores. The new deadline is now in June, which, as Foroughi described, “buys more time to put the pieces together” on AppLovin’s bid. 

“The president’s a great dealmaker — we’re proposing, essentially an enhancement to the deal that they’ve been working on, but a bigger version of all the deals contemplated,” he added.

AppLovin faces a crowded field of other interested U.S. backers, including Amazon, Oracle, billionaire Frank McCourt and his Project Liberty consortium, and numerous private equity firms. Some proposals reportedly structure the deal to give a U.S. buyer 50% ownership of the company, rather than a complete acquisition. The Chinese government will still need to approve the deal, and AppLovin’s interest in purchasing TikTok in “all markets outside of China” is “preliminary,” according to an April 3 SEC filing.

Correction: A prior version of this story incorrectly characterized China’s ongoing role in TikTok should AppLovin acquire the app.

WATCH: AppLovin CEO Adam Foroughi on its bid to buy TikTok

AppLovin CEO Adam Foroughi on its bid to buy TikTok

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