For the past 15 months, it’s been my pleasure to bring you news, analysis, and an abundant amount of alliteration each day via Data Sheet. But alas, my time has come to move on.
Starting on Friday, I’ll be handing off Data Sheet to a rotating cast of Fortune writers, led by David Meyer, Andrea Guzman, Kylie Robison, and Alexandra Sternlicht. The reason: I’ve accepted another job with a digital news startup in Houston, where I spent four years prior to writing for Fortune.
It’s been my privilege to guide Data Sheet, now in its 10th year, for this brief period in its history. I didn’t always get every prediction or insight exactly right (Netflix did crack down on password sharing quickly). I might have missed some fast-arriving trends (wish I’d been on the generative A.I. train earlier). But I hope this newsletter has been occasionally insightful, frequently thought-provoking, and even a little bit entertaining.
Many thanks to my two primary editors, Verne Kopytoff and Alexei Oreskovic, and our newsletter chiefs, Ashley Sylla and Jack Long, for all of their support. And many thanks to you, our loyal subscribers, who make Data Sheet part of your daily routine.
Now, one last Data Sheet for the road…
It looks like Mark Zuckerberg and Wall Street have reconciled their differences.
Meta shares soared 24% in midday trading Thursday after Zuckerberg, in an earnings call, declared 2023 will be a “year of efficiency” for the Facebook, Instagram, and WhatsApp parent.
The spike partially reflected investors’ satisfaction with Meta’s fourth-quarter earnings results. The company comfortably topped analysts’ lackluster revenue projections ($32.2 billion, down 4% year over year) and issued a first-quarter forecast that fell in line with expectations. Zuckerberg also suggested that the effects of Meta’s biggest headwinds, including a difficult digital ad landscape and Apple’s punishing data privacy changes, were easing up. An announcement of a $40 billion share buyback plan didn’t hurt, either.
But the bigger factor was Zuckerberg acknowledging the need to hold some fire in the new year after maintaining a “damn the torpedoes” approach to growth in 2022. For Zuckerberg, that means “cutting projects that aren’t performing or may no longer be crucial,” “removing some layers of middle management to make decisions faster,” and “increasing the efficiency of how we execute our top priorities.” Company officials said they now project 2023 expenses of $89 billion to $95 billion, down from earlier forecasts of $94 billion to $100 billion.
“We closed last year with some difficult layoffs and restructuring some teams,” Zuckerberg said. “When we did this, I said clearly that this was the beginning of our focus on efficiency and not the end.”
Zuckerberg’s comments certainly soothed nerves on Wall Street, where investors were rattled throughout 2022 by Meta’s profligate spending.
The company’s costs and expenses skyrocketed 64% between 2020 and 2022, while revenue only rose 36% during that time. A decent chunk of the extra spending stemmed from Zuckerberg’s insistence on pumping billions of dollars into Reality Labs—Meta’s division responsible for virtual reality, augmented reality, and metaverse initiatives—despite the unit posting massive losses.
Zuckerberg suggested in October that Meta would push full steam ahead with its approach, but a raft of layoffs announced in November and his statements Wednesday now point to a chastened CEO.
“Remember, this is a company that last quarter, everyone was like, ‘What on Earth are you doing, Mr. Zuckerberg? This is crazy,’” Jeffries analyst Brent Thill told Yahoo Finance. “And then two weeks later, he pulled back the throttle, which was at 12 on a scale of 10. He pulled it back to a 9, and now he's back at a 7 on expenses. So he's clearly listening to Wall Street, listening to what we all want.”
Even still, Zuckerberg remains only so willing to surrender his Reality Labs ambitions.
On Wednesday’s earnings call, Meta executives said they are not fundamentally pivoting from their plan to pioneer the next wave of technology—even as questions remain about the market for mixed reality and metaverse products. Zuckerberg suggested that Reality Labs expense cuts would be part and parcel to broader company-wide streamlining, as opposed to a fundamental retreat from the sector.
“None of the signals that I’ve seen so far suggests that we should shift the Reality Labs strategy long-term,” Zuckerberg said. “We are constantly adjusting the specifics of how we execute this. So I think that we’ll certainly look at that as part of the ongoing efficiency work.”
For now, reaching that middle ground is enough to repair Meta’s relationship with Wall Street. It’s proof that, once again, compromise is key to a happy marriage.
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Jacob Carpenter
