(News Bulletin 247) – The two tech groups jumped in post-market trading. Meta reported strong revenue growth and announced a dividend for the first time in its history, while Amazon beat expectations and delivered optimistic guidance for the first quarter.

The Gafam results season has ended and it is the two “smallest” market capitalizations, Meta and Amazon, which finally created the surprise.

Both companies delivered their quarterly accounts on Thursday after the market closed. These two publications were well received by the market, particularly that of Meta whose action took off by 15.2% in post-market trading while that of Amazon gained 7.1%.

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First dividend for Meta

Mark Zuckerberg’s group announced a significant return to its investors with both share buybacks of $50 billion and, above all, its very first dividend, to the tune of 50 cents per share.

The group had never paid a coupon before. Unlike share buybacks, the payment of a dividend is of a recurring nature, implicitly promising that it will be paid again by the company at the next publication. This form of remuneration is supposed to be theoretically neutral for the shareholder, but an increase in the dividend (or its introduction) is often well received by the market because it sends a signal of confidence about its prospects.

Meta has also published some good accounts. Revenue stood at $40.11 billion in the fourth quarter of 2023, up 25% year-over-year, its strongest growth rate since mid-2021 according to CNBC, while its earnings per share registered at $5.33. According to an LSEG consensus cited by CNBC, analysts expected $39.18 billion in revenue and earnings per share of $4.96.

Growth exceeding the group’s expectations is reassuring. Meta mainly derives its turnover from advertising. However, Alphabet’s advertising revenues, published a few days earlier, had clearly disappointed investors.

Meta reported that “ad impressions” grew 21% year-on-year while the price per ad increased 2%.

Meta Chief Financial Officer Susan Li said the company’s revenue growth was driven by Chinese retailers, such as Shein and Temu, buying advertising space on Facebook and Instagram, CNBC reports. Mark Zuckerberg, for his part, affirmed that his company’s advances in artificial intelligence had supported growth.

A margin that has doubled

The group also plans to intensify its efforts to integrate generative artificial intelligence into its applications, particularly to help content creators and advertisers. “We do not expect our Gen AI (generative artificial intelligence) products to be a significant revenue driver in 2024,” Susan Li told the Financial Times, adding however that “the monetization opportunity “closer is in our ad creation tools.”

“In the digital advertising space, the outlook for Meta is increasingly optimistic,” Mayuranki De, research analyst at Global X, told Bloomberg.

Furthermore, Meta’s operating margin doubled to 41% compared to 20% in the fourth quarter of 2022. A sign that the “year of efficiency” promised in February 2023 by Mark Zuckerberg has worked well, with Meta achieving to tighten its costs at the cost of more than 10,000 job cuts announced last March.

“The fruits of their cost-cutting measures are starting to show in the bottom line,” Vital Knowledge analysts wrote in a note cited by Bloomberg.

For the current quarter, Meta expects revenues of between $34.5 billion and $37 billion, significantly more than the $33.6 billion expected by analysts.

“Meta appears well-positioned to be one of the top players in the digital advertising market in 2024, while accelerating 4 points to 29% year-over-year at the top end of the Q1 2024 revenue outlook is also expected allay fears of a decline in demand from advertisers”, concludes UBS.

Record holidays for Amazon

For its part, Amazon successfully navigated the fourth quarter, a crucial season for the e-commerce giant, as it corresponds to the end-of-year holiday season. Amazon’s revenues rose 14% to $170 billion while earnings per share rose more than 30-fold to $1, up from three cents a year earlier. The LSEG consensus cited by CNBC called for revenue of $166.2 billion and earnings per share of 80 cents.

“This fourth quarter was a record holiday shopping season and capped off a robust 2023 for Amazon,” Andy Jassy, ​​Amazon CEO, was quoted as saying in a statement.

Amazon Web Services, the group’s cloud division widely followed by investors, saw its revenues grow 13% year-on-year to $24.2 billion, in line with expectations and slightly accelerating compared to the growth of the previous quarter. (12%).

Quoted by the Financial Times, Amazon CFO Brian Olsavsky indicated that this improvement in AWS growth seen at the end of the year would continue in 2024, as customers in this division began to relax their efforts on costs. . The executive said the company was seeing “significant interest” in its generative artificial intelligence services, but declined to disclose the impact that has had on cloud growth.

Economies that carry the margin

Like Meta, Amazon has also benefited from its efforts to reduce its expenses while its general manager, Andy Jassy, ​​has been cutting costs since 2022, which led the company to cut more than 35,000 positions last year.

In the fourth quarter, Amazon’s operating profit stood at $13.2 billion, almost five times more than in the fourth quarter of 2022. The corresponding margin thus increased from 1.8% to 7.8 %.

“Ultimately, despite all the concerns weighing on the tech sector, Amazon managed to perform surprisingly well,” said Jesse Cohen, senior analyst at Investing.com, as quoted by Bloomberg. “The results indicate that ongoing cost-cutting measures are having a positive impact on Amazon’s business prospects,” he adds.

Amazon also delivered solid prospects. The group expects revenues of between $138 billion and $143.5 billion for the first quarter of 2024, representing growth of 8% to 13% year-on-year. Operating profit is expected between $8 billion and $12 billion (compared to only $4.8 billion in the first quarter of 2023). Analysts expected sales of $142 billion and operating income of $9.12 billion, according to a consensus cited by Bloomberg.

“Overall, the headwinds that have weighed on Amazon stock – e-commerce slowdown in 2021, margin compression in 2022, and AWS slowdown in 2023 – will have dissipated over the course of 2024,” UBS judge.