Meta Platforms (NASDAQ:META) is focusing on streamlining operations by reducing the number of vice president positions, Business Insider reported. The move is aligned with the company’s strategy to lower costs and improve its financial results, enabling more aggressive investments in long-term growth drivers such as artificial intelligence (AI) technology.
According to the report, Meta had 300 vice presidents last year and plans to reduce this number to 250. By cutting down on management layers and re-evaluating projects, Meta aims to drive productivity and efficiency across the board.
Investing Big in AI
Meta is doubling down on AI with savings from these efficiency initiatives. During the Q1 2024 conference call, Meta’s leadership announced an increase in their full-year capital expenditures (CapEx) guidance. Meta now expects to spend between $35 billion and $40 billion in 2024, up from the previous forecast of $30 billion to $37 billion.
Meta is ramping up its infrastructure investments to support its AI roadmap. Further, the spending spree isn’t stopping in 2024. The company plans to increase CapEx in 2025 to fuel AI research and product development. This focus on AI is a big part of Meta’s long-term growth strategy.
Shareholder Returns
Besides for AI investments, Meta is focusing on enhancing its shareholders’ value.
In February 2024, during the Q4 earnings call, the company announced its first-ever dividend payout. This move indicates that Meta is committed to returning capital to shareholders as well, along with eyeing AI growth.
The Impact on Earnings
Meta’s aggressive investment in AI comes at a cost. The company’s substantial resource allocation to AI development is expected to weigh on its earnings in the short term. The company is offering its latest AI models to the public for free, raising concerns about how quickly these investments will start paying off.
According to the TipRanks Stock Analysis tool, “Bulls Say, Bears Say,” analysts bearish on Meta stock caution that META increased its CapEx guidance for the second quarter in a row. This increased spending could pressure its short-term earnings.
Is Meta Stock a Buy or Sell?
Meta stock has gained significantly over the past year, benefitting from its focus on cutting costs, improving user engagement on its social media platforms, and integrating AI into its products. Moreover, it is up about 44% year-to-date.
Despite the notable increase in its share price, Wall Street is bullish about its prospects. Meta stock has 37 Buys, three Holds, and two Sell recommendations for a Strong Buy consensus rating. The analysts’ price target on META stock is $523.61, implying a limited upside potential of 2.90%.
