Meta Platforms Inc. and Amazon.com Inc. witnessed a remarkable surge in pre-market trading on Friday after exceeding Wall Street’s expectations with their quarterly earnings and outlooks.
Amidst the ongoing buzz surrounding artificial intelligence and its potential impact on profits,
Meta and Amazon emerged as standout performers in the Big Tech earnings season. The key contributing factor to their success was the strategic reduction of tens of thousands of jobs, coupled with robust performance in their core businesses during the holiday season.
This positive outcome prompted Meta to unveil plans for an additional $50 billion in stock buybacks and its inaugural quarterly dividend, providing investors with a compelling reason to maintain their positions as reported by Bloomberg.
As a result, the combined market value of their stocks is poised to increase by a staggering $279 billion as the New York morning approaches. Amazon, witnessing a 7.5% surge, and Meta, with a remarkable 17% increase in premarket trading, demonstrated their resilience and strategic prowess.
This significant market response underscores the market's confidence in the strategic decisions made by these tech giants, particularly in terms of workforce optimization and focusing on core business strengths.
Amazon's exceptional online sales growth, the best since the early days of the pandemic, was fueled by improvements in shipping times. Notably, the company implemented its most extensive round of corporate job cuts in 2022, affecting approximately 35,000 employees, and has signaled further eliminations in Prime Video, studios, and Twitch livestreaming businesses.
This newfound cost discipline has proven beneficial for investors, as the companies streamlined less productive sectors while reinvesting savings into faster-growing segments, thereby enhancing overall margins.
Meta CEO Mark Zuckerberg acknowledged the outstanding fourth-quarter results, which included a 25% increase in sales and tripled profits. The success has prompted questions about whether Meta should resume heavy investments.
Zuckerberg, however, expressed a preference for maintaining the company as a leaner entity, emphasizing the cumulative impact of incremental additions to the workforce. The introduction of Meta's first-ever dividend is anticipated to yield Zuckerberg approximately $700 million annually.
This financial move not only underscores the company's commitment to shareholder value but also positions Meta as a more mature and financially stable entity.
For years, both Meta and Amazon consistently reinvested profits to fuel expansion and technological advancements. The approach was particularly evident during the Covid-19 pandemic, with aggressive spending and hiring sprees.
Now, the challenge lies in determining whether the leaner, more focused versions of Meta and Amazon can sustain their drive for bold and ambitious tech advancements that have solidified their positions as household names.
In Meta's case, this involves aggressive spending on artificial intelligence advancements, particularly in generative AI and the underlying technologies supporting social media products and ad targeting.
Zuckerberg remains committed to virtual and augmented reality technologies, even as the Reality Labs division incurred a $16 billion loss in 2023. Despite ambitious tech goals, Zuckerberg plans to keep headcount growth minimal in 2024 and beyond, aligning with the cultural ethos of maintaining a leaner organization.
This strategic approach reflects a cautious and deliberate stance towards growth, ensuring that the company can navigate the competitive landscape with agility and efficiency.
Amazon CEO Andy Jassy highlighted a 45-cent decrease per unit in the cost to serve a customer's order in 2023, the first such reduction in five years. Jassy pledged to continue seeking ways to further decrease costs and exercise caution in new investments.
Chief Financial Officer Brian Olsavsky echoed this sentiment, emphasizing the company's commitment to efficiency and doing more with less as they navigate future endeavors. This financial discipline aligns with Amazon's long-term strategy of sustainable growth and profitability, showcasing their dedication to delivering value to both customers and shareholders.
The focus on reducing costs reflects a commitment to operational excellence, ensuring Amazon's continued competitiveness in the evolving landscape of e-commerce and technology.
02.02.2024
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