Meta heralds ‘year of efficiency’ as costs rise

Yahoo Finance’s Allie Garfinkle joins the Live show to discuss Meta’s cost-cutting goals.

Video transcript

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RACHELLE AKUFFO: Meta might be grappling with some overhead costs. The tech giant out with some interesting stats about just how much it takes to run one of the world's largest social networks, especially during earnings. Now Yahoo Finance's Allie Garfinkle with more on how it's set to affect their bottom line. The year of efficiency, Zuckerberg said.

ALLIE GARFINKLE: Yeah, and Meta told the most convincing cost-cutting story this week, Rachelle. Among all the big tech tickers, they actually did the best in a lot of ways. And-- though a closer look at some of these cost-cutting strategies, I think, is worth doing, because it becomes clear that they're trying to eke out profits just about wherever they can. One of those areas is data centers.

Now, if you have to explain to your parents what a data center is, imagine a building with lots of internet infrastructure servers, that kind of thing. So which is-- that sort of thing is essential for tech giants. But they also can get expensive, right? Real estate, servers. And in Meta's case, what they're saying is that they're set to save at least $3 billion on these data centers in some cases. It could be as much as $4 billion.

In the call they said, and I quote, "We expect capital expenditures to be in the range of $30 billion to $33 billion lowered from our prior estimate of $34 billion to $37 billion. The reduced outlook updates are reflected plans for lower center construction spend in 2023 as we shift to a new data center architecture that is more cost-efficient and can support both AI and non-AI workloads." So they're thinking about AI at a moment that's really clear.

However, it's important to say that this plan, while it seems like it makes sense, is a little vague. A lot of analysts I talked to said as much. What they've understood is this, Meta's plan is to build out spaces over time instead of building-- buying buildings all at once. Now, that seems like it makes sense. However, over time, it might end up costing more money. It's a borrowing from Peter to pay Paul situation.

RACHELLE AKUFFO: So then what does that efficiency mean for a company like Meta?

ALLIE GARFINKLE: You know, I think it's complicated, Rachelle, because they also are losing a lot of money on Reality Labs. Let's remember, despite the numbers that everybody is really excited about, they still are losing billions. And they are projecting to continue losing those billions. Now, the Reality Labs payoff, the metaverse payoff, Mark Zuckerberg is saying, is in 2023. So it's going to be an interesting task to try to sell efficiency while also being-- convincing people that these losses are worth it and worth it over time.

RACHELLE AKUFFO: All right, thank you so much. A lot of stuff to unpack there. But we see at least the stock price enjoying some rewards today. Allie Garfinkle, thank you so much.