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Business

Meta stock spikes despite earnings miss, as Facebook hits 2 billion users for first time and sales guidance quells fears

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Meta Platforms Inc. shares soared in after-hours trading Wednesday despite an earnings miss, as the Facebook parent company guided for potentially more revenue than Wall Street expected in the new year and promised more share repurchases amid cost cuts.

Meta
META,
+2.79%
said it hauled in $32.17 billion in fourth-quarter revenue, down from $33.67 billion a year ago but stronger than expectations. Earnings were $4.65 billion, or $1.76 a share, compared with $10.3 billion, or $3.67 a share, last year.

Analysts polled by FactSet expected Meta to post fourth-quarter revenue of $31.55 billion on earnings of $2.26 a share, and the beat on sales coincided with a revenue forecast that also met or exceeded expectations. Facebook Chief Financial Officer Susan Li projected first-quarter sales of $26 billion to $28.5 billion, while analysts on average were projecting first-quarter sales of $27.2 billion.

Shares jumped more than 18% in after-hours trading immediately following the release of the results, after closing with a 2.8% gain at $153.12.

Alphabet Inc.’s
GOOGL,
+1.61%

GOOG,
+1.56%
Google and Pinterest Inc.
PINS,
+1.56%
benefited from Meta’s results, with shares for each company rising 4% in extended trading Wednesday.

“Our community continues to grow and I’m pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives,” Meta Chief Executive Mark Zuckerberg said in a statement announcing the results. “The progress we’re making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”

Read more: Snap suffers worst sales growth yet in holiday quarter, stock plunges after earnings miss

Facebook’s 2 billion-user milestone was slightly better than analysts expected for user growth on Meta’s core social network. Daily active users across all of Facebook’s apps neared, but did not crest, another round number, reaching 2.96 billion, up 5% from a year ago.

Meta has been navigating choppy ad waters as it copes with increasing competition from TikTok and fallout from changes in Apple Inc.’s
AAPL,
+0.79%
ad-tracking system in 2021 that punitively harmed Meta, costing it potentially billions of dollars in advertising sales. Meta has invested heavily in artificial-intelligence tools to rev up its ad-targeting systems and making better recommendations for users of its short-video product Reels, but it laid off thousands of workers after profit and revenue shrunk in recent quarters.

The cost cuts seemed to pay off Wednesday. While Facebook missed on its earnings, it noted that the costs of its layoffs and other restructuring totaled $4.2 billion and reduced the number by roughly $1.24 a share.

Meta executives said they now expect operating expenses to be $89 billion to $95 billion this year, down from previous guidance for $94 billion to $100 billion. Capital expenditures are expected to be $30 billion to $33 billion, down from previous guidance of $34 billion to $37 billion, as Meta cancels multiple data-center projects.

In a conference call with analysts late Wednesday, Zuckerberg called 2023 the “year of efficiency.”

“The reduced outlook reflects our updated plans for lower data-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,” Li said in her outlook commentary included in the release.

Meta expects to increase its spending on its own stock. The company’s board approved a $40 billion increase in its share-repurchase authorization; Meta spent nearly $28 billion on its own shares in 2022, and still had nearly $11 billion available for buybacks before that increase.

“Investors are cheering Meta’s plans to return more capital to shareholders despite worries over rising costs related to its metaverse spending,” said Jesse Cohen, senior analyst at Investing.com.

The results came a day after Snap Inc.
SNAP,
-10.29%
posted fourth-quarter revenue of $1.3 billion, flat from a year ago and the worst year-over-year sales growth Snap has ever reported. But they also arrived on the same day Facebook scored a major win in a California court. The company successfully fended off the Federal Trade Commission bid to win a preliminary injunction to block Meta’s planned acquisition of VR startup Within Unlimited.

Read more: Meta wins bid to buy VR startup Within Unlimited, beating U.S. FTC in court: report

Meta shares have plunged 53% over the past 12 months, while the broader S&P 500 index 
SPX,
+1.05%
has tumbled 10% the past year.

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Technology

Microsoft’s Cloud Doesn’t Quite Cover All

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Demand for Windows operating-system software has fallen with sales of the personal computers that use it.



Photo:

STEVE MARCUS/REUTERS

Microsoft’s

MSFT -0.22%

latest results are like a blast from the past—and not in a good way. 

The software titan has come a long way from the days when it depended on its ubiquitous Windows operating system. But it is still a lucrative business—enough so that a slump in personal computer sales can weigh on Microsoft’s financial results. And a slump this is; IDC reported earlier this month that PC unit sales slid 28% year over year during the December quarter—the biggest drop tracked by the market research firm’s numbers going at least back to 2015. 

Not surprisingly then, Microsoft said Tuesday in its fiscal second quarter results report that Windows revenue slid 27% year over year to about $4.9 billion for the same period. That is less than 10% of the company’s revenue now, but it is a profitable contributor given that much comes from PC makers simply paying Microsoft to bundle Windows onto their machines. Hence, operating profits in Microsoft’s More Personal Computing segment that includes the Windows business slid 48% year over year. That played a big part in the company’s total operating profit for the quarter coming about 3% shy of Wall Street’s forecasts, at $20.4 billion.   

Investors have largely learned to look past Windows these days in favor of Microsoft’s far more important cloud business. But as Microsoft’s last report three months ago proved, even that isn’t immune to the slumping global economy. Azure, the cloud computing service that competes squarely with

Amazon

‘s AWS, grew revenue by 31% year over year. That slightly exceeded Wall Street’s forecasts, but it was still a record-low pace for the business. Things also aren’t looking like they will get much better anytime soon. Chief Financial Officer

Amy Hood

noted that cloud growth moderated, “particularly in December,” and projected revenue growth of 14% to 15% year over year for the company’s Intelligent Cloud segment during the March quarter—a deceleration of 11 percentage points from the same period last year. 

Investors were at least better-prepared for bad news this time. Microsoft’s share price slipped 1% in after-hours trading following the results and forecast compared with the 8% drop sparked by its previous quarterly report. As the first major tech player to post results for the December quarter, Microsoft also casts a large shadow. It has a highly diversified business that spans corporate and consumer software, cloud services, videogame systems and even online advertising. The company even noted that the recent spate of big tech layoffs will hurt its LinkedIn business, which is a major corporate recruiting tool in the tech sector. Those layoffs include 10,000 positions to be cut from Microsoft’s own payroll–another sign that even a cloud titan can’t keep floating above the economy. 

Write to Dan Gallagher at dan.gallagher@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

DOJ Sues Google, Seeking to Break Up Online Advertising Business

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The Justice Department is seeking the breakup of Google’s business brokering digital advertising across much of the internet, a major expansion of the legal challenges the company faces to its business in the U.S. and abroad.

A lawsuit filed Tuesday, the Justice Department’s second against the

Alphabet Inc.

GOOG -1.98%

unit following one filed in 2020, alleges that Google abuses its role as one of the largest brokers, suppliers and online auctioneers of ads placed on websites and mobile applications. The filing promises a protracted court battle with wide-ranging implications for the digital-advertising industry.

Filed in federal court in Virginia, the case alleges that Google abuses monopoly power in the ad-tech industry, hurting web publishers and advertisers that try to use competing products. Eight states, including California and New York, joined the Justice Department’s lawsuit.

The lawsuit asks the court to unwind Google’s “anticompetitive acquisitions,” such as its 2008 purchase of ad-serving company DoubleClick, and calls for the divestiture of its ad exchange.

“For 15 years Google has pursued a course of anticompetitive conduct that has allowed it to halt the rise of rival technologies, manipulate auction mechanics, insulate itself from competition, and forced advertisers and publishers to use its tools,” Attorney General

Merrick Garland

said at a press conference Tuesday. “Google has engaged in exclusionary conduct that has severely weakened if not destroyed competition in the ad-tech industry.”

Attorney General Merrick Garland said Tuesday that the digital-advertising industry was harmed by Google’s allegedly monopolistic conduct.



Photo:

Al Drago/Bloomberg News

A Google spokesman said the lawsuit “attempts to pick winners and losers in the highly competitive advertising technology sector.”

“DOJ is doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow,” the spokesman said.

By calling for specific divestitures from Google’s ad-tech business, the Justice Department lawsuit went further in seeking a breakup than some antitrust experts had expected. Shares of Alphabet fell by about 2% in trading on Tuesday.

Though largely invisible to internet users, the ad-tech tools controlled by Google facilitate much of the buying and selling of digital ads that helps fund online publishers. Google’s business includes a tool publishers can use to offer ad space, a product for advertisers to buy those slots and an exchange that automatically links bidders with webpages as they are being loaded for individual users.

Big tech companies such as Google are under a barrage from lawmakers and regulators across multiple continents who have targeted the companies’ dominance in online markets. Justice Department officials also are investigating

Apple Inc.

The Federal Trade Commission has sued

Meta Platforms Inc.’s

Facebook unit over antitrust allegations and

Microsoft Corp.

to block its planned $75 billion acquisition of

Activision Blizzard Inc.

President Biden recently urged lawmakers from both parties to unite behind legislation seeking to rein in tech giants. The European Union also has opened cases looking at alleged anticompetitive conduct by Google, Meta and other companies.

The Justice Department’s 2020 lawsuit against Google targeted its position in online search markets, including an agreement to make Google search the default in Apple’s Safari web browser. Google is fighting the case, which is expected to go to trial this year.

Alphabet gets about 80% of its business from advertising. The Justice Department’s new suit targets the subset of that ad business that brokers the buying and selling of ads on other websites and apps. Google reported $31.7 billion in revenue in 2021 from that ad-brokering activity, or about 12% of Alphabet’s total revenue. Google distributes about 70% of that revenue to web publishers and developers.

Last year, Google offered to split off parts of its ad-tech business into a separate company under the Alphabet umbrella to fend off the most recent Justice Department investigation. DOJ officials rejected the offer and decided to pursue the lawsuit instead.

For years, Google has faced allegations from advertising- and media-industry executives, lawmakers and regulators that its presence at multiple points of the online ad-buying process harms publishers and gives it an unfair advantage over rivals. Google also operates the most popular search engine and the largest online video-streaming site, YouTube, giving rise to allegations it has tilted the market in its own favor.

Rivals say that Google’s power in digital advertising stems from a series of acquisitions Google used to build its ad-tech business, beginning with the company’s $3.1 billion purchase of DoubleClick. The FTC approved the merger in a controversial decision. Google went on to purchase a host of other startups including the mobile-advertising company AdMob.

“Having inserted itself into all aspects of the digital advertising marketplace, Google has used anticompetitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies,” the complaint read.

Google has said it has no plans to sell or exit the ad-tech business. It has also strongly contested claims in a lawsuit filed by state attorneys general, led by Texas, containing allegations similar to the Justice Department complaint. A federal judge denied the bulk of Google’s motion to dismiss the case last year, allowing it to proceed to the discovery stage and ultimately toward trial.

Google’s Android operating system is the most popular in the world—you can find Android code on everything from Peloton bikes to kitchen appliances and even NASA satellites. WSJ’s Dalvin Brown explains why it is the world’s most-used OS. Illustration: Rami Abukalam

Any divestiture of parts of Google’s ad-tech business would cause big ripple effects across the online advertising industry, which has recently shown signs of weakness as consumers dial back purchases in response to worsening economic conditions.

Breaking off parts of Google’s ad-tech business from the rest of the company could take years of litigation to resolve. Depending on the outcome of the case, ad-tech executives have said the results could range from a higher share of ad dollars flowing to publishers to lower overall spending because digital ads would be less efficient without Google brokering them.

The 149-page complaint makes detailed allegations about the internal workings of Google’s ad-tech operations. The suit alleges, for instance, that Google used anticompetitive tactics to build up the market share of its own ad server, which issues requests for advertisements on behalf of websites, and then used that market power to effectively push publishers into sending their ad inventory only to Google’s in-house ad exchange, AdX.

The Justice Department argues, in part, that this conduct locked out rival ad-tech providers, increasing prices for advertisers and costs of publishers.

“Google keeps at least thirty cents—and sometimes far more—of each advertising dollar flowing from advertisers to website publishers through Google’s ad tech tools,” the lawsuit alleges. “Google’s own internal documents concede that Google would earn far less in a competitive market.”

The lawsuit also alleges that Google executives worked to kill a rival online-bidding technology called “header bidding,” which the lawsuit says the company referred to internally as an “existential threat.” As part of a plan dubbed Project Poirot, the company allegedly changed its own ad-buying tools to underbid on behalf of advertisers when they turned to outside ad exchanges that used header bidding, so those rivals would lose more auctions and “dry out,” the complaint says.

At one point, Google also approached

Amazon.com Inc.,

to ask “what it would take for Amazon to stop investing in its header bidding product,” the complaint alleges, adding that Amazon rebuffed those requests.

“Google uses its dominion over digital advertising technology to funnel more transactions to its own ad tech products where it extracts inflated fees to line its own pockets at the expense of the advertisers and publishers it purportedly serves,” the complaint read.

The Justice Department case overlaps in some ways with the late 2020 lawsuit from the group of U.S. states led by Texas.

In Tuesday’s complaint, the Justice Department quotes some of the same internal communications as the Texas-led lawsuit, including how one Google executive compared the company’s control over ad-tech to the financial sector: “The analogy would be if Goldman or Citibank owned the NYSE,” referring to the New York Stock Exchange.

The case also shares similarities with an investigation that the EU’s top antitrust enforcer, the European Commission, opened in 2021, as well as one by the U.K.’s Competition and Markets Authority. Those probes are exploring allegations that Google favors its own ad-buying tools in the advertising auctions it runs, but also look at other elements of Google’s ad-tech business. The EU, for instance, is also looking at Google’s alleged exclusion of competitors from brokering ad-buys on its video site YouTube.

Mr. Garland said Tuesday that the Justice Department filed its own lawsuit because the federal government was harmed by Google’s allegedly monopolistic conduct. Federal agencies have since 2019 spent over $100 million on display ads, the complaint says. The government paid inflated fees and was harmed by manipulated advertising prices because of Google’s anticompetitive conduct, the lawsuit alleges.

Microsoft is deepening its partnership with OpenAI, the company behind ChatGPT and Dall-E. That has investors and analysts speculating whether Microsoft could challenge Google’s dominance in search. WSJ Heard on the Street columnist Dan Gallagher joins host Zoe Thomas to discuss how AI could affect search and at what cost.

Jonathan Kanter,

the assistant attorney general for antitrust, said while there are similarities with other lawsuits against Google, the Justice Department’s complaint is based on its own investigation that yielded “meticulous detail” about Google’s ad-tech business.

“We detail many facts, many episodes that in the individual and in the aggregate have maintained numerous monopolies,” Mr. Kanter said.

Google has attempted to settle the claims against its ad-tech business. In addition to offering to split off parts of its ad-tech business to avoid the Justice Department suit, the company last year discussed with the EU an offer to allow competitors to broker the sale of ads directly on the video service.

In 2021, the company agreed to give U.K. antitrust regulators effective veto power over elements of its plans to remove a technology called third-party cookies from its Chrome browser to settle an investigation there into the plan.

In France, Google agreed to pay a fine of 220 million euros, equivalent to about $239 million, and to improve data access to competing ad-tech companies, to not use its data in ways rivals couldn’t reproduce to settle a similar antitrust investigation in the country.

—Keach Hagey contributed to this article.

Write to Miles Kruppa at miles.kruppa@wsj.com and Sam Schechner at Sam.Schechner@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Hiring, Wage Gains Eased in December, Pointing to a Cooling Labor Market in 2023

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The U.S. labor market is losing momentum as hiring and wage growth cooled in December, showing the effects of slower economic growth and the Federal Reserve’s interest-rate increases.

After two straight years of record-setting payroll growth following the pandemic-related disruptions, the labor market is starting to show signs of stress. That suggests 2023 could bring slower hiring or outright job declines as the overall economy slows or tips into recession.

Employers added 223,000 jobs in December, the smallest gain in two years, the Labor Department said Friday. Average hourly earnings were up 4.6% in December from the previous year, the narrowest increase since mid-2021, and down from a March peak of 5.6%.

All told, employers added 4.5 million jobs in 2022, the second-best year of job creation after 2021, when the labor market rebounded from Covid-19 shutdowns and added 6.7 million jobs. Last year’s gains were concentrated in the first seven months of the year. More recent data and a wave of tech and finance-industry layoffs suggest the labor market, while still vibrant, is cooling.

“I do expect the economy to slow noticeably by June, and in the second half of the year we’ll see a greater pace of slowing if not outright contraction,” said

Joe Brusuelas,

chief economist at RSM U.S.

Friday’s report sent markets rallying as investors anticipated it would cause the Fed to slow its pace of rate increases. The central bank’s next policy meeting starts Jan. 31. The Fed’s aggressive rate increases aimed at combating inflation didn’t significantly cool 2022 hiring, but revisions to wage growth showed recent gains weren’t as brisk as previously thought.

The Dow Jones Industrial Average rose 700.53 points, or 2.13%, on Friday. The S&P 500 Index was up 2.28% and NASDAQ Composite Index advanced 2.56%. The benchmark 10-year Treasury yield declined 0.15 percentage point to 3.57%. Yields fall as bond prices rise.

The unemployment rate fell to 3.5% in December from 3.6% in November, matching readings earlier in 2022 and just before the pandemic began as a half-century low. Fed officials said last month the jobless rate would rise in 2023. December job gains were led by leisure and hospitality, healthcare and construction.

Historically low unemployment and solid hiring, however, might mask some signs of weakness. The labor force participation rate, which measures the share of adults working or looking for work, rose slightly to 62.3% in December but is still well below prepandemic levels, one possible factor that could make it harder for employers to fill open positions.

The average workweek has declined over the past two years and in December stood at 34.3 hours, the lowest since early 2020.

Hiring in temporary help services has fallen by 111,000 over the past five months, with job losses accelerating. That could be a sign that employers, faced with slowing demand, are reducing their employees’ hours and pulling back from temporary labor to avoid laying off workers.

The tech-heavy information sector lost 5,000 jobs in December, the Labor Department report showed. Retail saw a 9,000 rise in payrolls, snapping three straight months of declines.

Tech companies cut more jobs in 2022 than they did at the height of the Covid-19 pandemic, according to layoffs.fyi, which tracks industry job cuts. On Wednesday,

Salesforce Inc.

said it would cut 10% of its workforce, unwinding a hiring spree during the pandemic. The Wall Street Journal reported that

Amazon.com Inc.

would lay off 18,000 people, roughly 1.2% of its total workforce. Other companies, such as

Facebook

parent

Meta Platforms Inc.,

DoorDash Inc.

and

Snap Inc.,

have also recently cut positions.

Companies in the interest-rate-sensitive housing and finance sectors, including

Redfin Corp.

,

Morgan Stanley

and

Goldman Sachs Group Inc.,

have also moved to reduce staff.


Months where overall jobs gained

Months where overall jobs declined

By the end of 2022, the U.S. had added nearly 2 million jobs since the end of 2019

More than 20 million jobs were lost near the start of the pandemic

Employment returns to prepandemic level

A monthly gain of more than 4 million jobs

Months where

overall jobs gained

Months where

overall jobs declined

By the end of 2022, the U.S. had added nearly 2 million jobs since the end of 2019

More than 20 million jobs were lost near the start of the pandemic

Employment returns to prepandemic level

A monthly gain of more than 4 million jobs

Months where

overall jobs gained

Months where

overall jobs declined

By the end of 2022, the U.S. had added nearly 2 million jobs since the end of 2019

More than 20 million jobs were lost near the start of the pandemic

Employment returns to prepandemic level

A monthly gain of more than 4 million jobs

Months where

overall jobs gained

Months where

overall jobs declined

By the end of 2022, the U.S. had added nearly 2 million jobs since the end of 2019

More than 20 million jobs were lost near the start of the pandemic

Employment returns to prepandemic level

A monthly gain of more than 4 million jobs

Months where

overall jobs gained

Months where

overall jobs declined

By the end of 2022, the U.S. had added nearly 2 million jobs since the end of 2019

More than 20 million jobs were lost near the start of the pandemic

Employment returns to prepandemic level

A monthly gain of more than 4 million jobs

Other data released this week point to a slowing U.S. economy. New orders for manufactured goods fell a seasonally adjusted 1.8% in November, the Commerce Department said Friday. Business surveys showed a contraction in economic activity in December, according to the Institute for Supply Management. Manufacturing firms posted the second-straight contraction following 29 months of expansion, and services firms snapped 30 straight months of growth in December.

Economists surveyed by The Wall Street Journal last fall saw a 63% probability of a U.S. recession in 2023. They saw the unemployment rate rising to 4.7% by December 2023.

“We’ve obviously been in a situation over the past few months where employment growth has been holding up surprisingly well and is slowing very gradually,” said

Andrew Hunter,

senior U.S. economist at Capital Economics. “There are starting to be a few signs that we’re maybe starting to see a bit more of a sharp deterioration.”

Max Rottersman, a 61-year-old independent software developer, said he had been very busy with consulting jobs during much of the pandemic. But that changed over the summer when work suddenly dried up.

“I’m very curious to see whether I’m in high demand in the next few months or whether—what I sort of expect will happen—there will be tons of firing,” he said.

Despite some signs of cooling, the labor market remains exceptionally strong. On Wednesday, the Labor Department reported that there were 10.5 million job openings at the end of November, unchanged from October, well more than the number of unemployed Americans seeking work.

Some of those open jobs are at Caleb Rice’s home-renovation business in Calhoun, Tenn., which has been consistently busy since the start of the pandemic. The small company has raised pay and gone to a four-day week in an effort to hold on to workers.

“If I could get three more skilled hands right now, I’d be comfortable,” Mr. Rice said. “The way it goes is I’ll hire five, two will show up and of those two one won’t be worth a flip.”

Fed officials have been trying to engineer a gradual cooling of the labor market by raising interest rates. Officials are worried that a too-strong labor market could lead to more rapid wage increases, which in turn could put upward pressure on inflation as firms raise prices to offset higher labor costs.

The central bank raised rates at each of its past seven meetings and has signaled more rate increases this year to bring inflation down from near 40-year highs. Fed officials will likely take comfort in the slowdown in wage gains, which could prompt them to raise rates at a slower pace, Mr. Brusuelas, the economist, said.

“We’re closer to the peak in the Fed policy rate than we were prior to the report, and the Fed can strongly consider a further slowing in the pace of its hikes,” he said. “We could plausibly see a 25-basis-point hike versus a 50-basis-point hike at the Feb. 1 meeting.”

Write to David Harrison at david.harrison@wsj.com

Corrections & Amplifications
A graphic in an earlier version of this article showing the change in nonfarm payrolls since the end of 2019 was incorrectly labeled as change since January 2020. (Corrected on Jan. 6)

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Amazon Layoffs to Hit Over 17,000 Workers, the Most in Recent Tech Wave

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Amazon.

AMZN -0.79%

com Inc.’s layoffs will affect more than 17,000 employees, according to people familiar with the matter, the highest reduction tally revealed in the past year at a major technology company as the industry pares back amid economic uncertainty.

The Seattle-based company in November said that it was beginning layoffs among its corporate workforce, with cuts concentrated on its devices business, recruiting and retail operations. At the time, The Wall Street Journal reported the cuts would total about 10,000 people. Thousands of those cuts began last year.

The rest of the cuts will bring the total number of layoffs to more than 17,000 and will be made over the coming weeks, some of the people said. As of September,

Amazon

AMZN -0.79%

employed 1.5 million people, with a large percentage of them in its warehouses. The layoffs are concentrated in the company’s corporate ranks, some of the people said.

Amazon

was one of the biggest beneficiaries of the Covid-19 pandemic as customers flocked to online shopping. The rush to Amazon’s various businesses, from e-commerce to groceries and cloud computing, pushed forward years of growth for the company. To keep up with demand, Amazon doubled its logistics network and added hundreds of thousands of employees.

When demand started to wane with customers moving back to shopping in stores, Amazon initiated a broad cost-cutting review to pare back on units that were unprofitable, the Journal reported. In the spring and summer, the company made targeted cuts to bring down costs, shutting physical stores and business units such as Amazon Care. Amazon later announced a companywide hiring freeze before deciding to let employees go.

Many tech companies have cut jobs as the economy sours. Amazon’s layoffs of more than 17,000 employees would represent the highest number of people let go by a tech company in the past few months, according to tallies released on Layoffs.fyi, a website that tracks the events as they surface in media reports and company releases.

The trend has affected companies such as Amazon and others that have acknowledged they grew too quickly in many cases.

Facebook

parent

Meta Platforms Inc.

said it would cut more than 11,000 workers, or 13% of its staff, adding to layoffs at

Lyft Inc.,

HP Inc.

and other tech companies. On Wednesday,

Salesforce Inc.

said that it was laying off 10% of its workforce. Co-Chief Executive

Marc Benioff

said the business-software provider hired too many people as revenue surged earlier in the pandemic. “I take responsibility for that,” he said.

Write to Dana Mattioli at dana.mattioli@wsj.com and Jessica Toonkel at jessica.toonkel@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the January 5, 2023, print edition as ‘Amazon Layoffs To Exceed Initial Reports.’

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Business

Tesla is not alone: 18 (and a half) other big stocks are headed for their worst year on record

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In the worst year for stocks since the Great Recession, several big names are headed for their worst year on record with just one trading day left in 2022.

The S&P 500 index
SPX,
+1.75%
and Dow Jones Industrial Average
DJIA,
+1.05%
are both headed for their worst year since 2008, with declines of 20.6% and 9.5% respectively through Thursday. But at least 19 big-name stocks — and half of another — are headed for a more ignominious title for 2022, according to Dow Jones Market Data: Worst year ever.

Tesla Inc.
TSLA,
+8.08%
is having the worst year among the group of S&P 1500 constituents with a market capitalization of $30 billion or higher headed for record annual percentage declines. Tesla shares have declined 65.4% so far this year, which would be easily the worst year on record for the popular stock, which has only had one previous negative year since going public in 2010, an 11% decline in 2016.

Tesla may not be the worst decliner on the list by the time 2023 arrives, however, as another Silicon Valley company is right on its heels. Meta Platforms Inc.
META,
+4.01%,
the parent company of Facebook, has fallen 64.2% so far this year, as Chief Executive Mark Zuckerberg has stuck to spending billions to develop the “metaverse” even as the online-advertising industry that provides the bulk of his revenue has stagnated. It would also only be the second year in Facebook’s history that the stock has declined, after a 25.7% drop in 2018, though shares did end Facebook’s IPO year of 2012 30% lower than the original IPO price.

Only one other stock could contend with Tesla and Meta’s record declines this year, and Tesla CEO Elon Musk has some familiarity with that company as well. PayPal Holdings Inc.
PYPL,
+4.46%,
where Musk first found fame during the dot-com boom, has declined 63.2% so far this year as executives have refocused the company on attracting and retaining high-value users instead of trying to get as many users as possible on the payments platform. It would be the second consecutive down year for PayPal, which had not experienced that before 2021 since spinning off from eBay Inc.
EBAY,
+4.76%
in 2015.

None of the other companies headed for their worst year yet stand to lose more than half their value this year, though Charter Communications Inc.
CHTR,
+1.99%
is close. The telecommunications company’s stock has declined 48.2% so far, as investors worry about plans to spend big in 2023 in an attempt to turn around declining internet-subscriber numbers.

In addition to the list below, Alphabet Inc.’s class C shares
GOOG,
+2.88%
are having their worst year on record with a 38.4% decline. MarketWatch is not including that on the list, however, as Alphabet’s class A shares
GOOGL,
+2.82%
fell 55.5% in 2008; the separate class of nonvoting shares was created in 2012 to allow the company — then still called Google — to continue issuing shares to employees without diluting the control of co-founders Sergey Brin and Larry Page.

Apart from that portion of Alphabet’s shares, here are the 19 large stocks headed for their worst year ever, based on Thursday’s closing prices.

Company % decline in 2022
Tesla Inc.
TSLA,
+8.08% 		65.4%
Meta Platforms Inc.
META,
+4.01% 		64.2%
PayPal Holdings Inc.
PYPL,
+4.46% 		62.6%
Charter Communications Inc. 48.0%
Edwards Lifesciences Corp.
EW,
+2.87% 		41.9%
ServiceNow Inc.
NOW,
+3.67% 		39.9%
Zoetis Inc.
ZTS,
+3.00% 		39.3%
Fidelity National Information Services Inc.
FIS,
+2.03% 		37.8%
Accenture PLC
ACN,
+2.00% 		35.3%
Fortinet Inc.
FTNT,
+2.82% 		31.5%
Estee Lauder Cos. Inc.
EL,
+1.52% 		32.5%
Moderna Inc.
MRNA,
+1.34% 		29.6%
Iqvia Holdings Inc.
IQV,
+2.94% 		26.3%
Carrier Global Corp.
CARR,
+2.17% 		22.8%
Hilton Worldwide Holdings Inc.
HLT,
+1.63% 		19.2%
Broadcom Inc.
AVGO,
+2.37% 		16.2%
Arista Networks Inc.
ANET,
+2.27% 		15.2%
Dow Inc.
DOW,
+1.32% 		10.7%
Otis Worldwide Corp.
OTIS,
+2.16% 		9.2%

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Business

Facebook Parent’s Oversight Board Criticizes ‘Cross Check’ Program That Protects VIP Users

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Meta Platforms Inc. has long given unfair deference to VIP users of its Facebook and Instagram services under a program called “cross check” and has misled the public about the program, the company’s oversight board concluded in a report issued Tuesday.

The report offers the most detailed review to date of cross check, which Meta has billed as a quality-control effort to prevent moderation errors on content of heightened public interest. The oversight board took up the issue more than a year ago in the wake of a Wall Street Journal article based on internal documents that showed that cross check was plagued by favoritism, mismanagement and understaffing.

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Business

How Elon Musk’s Twitter Faces Mountain of Debt, Falling Revenue and Surging Costs

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To make the deal work, Mr. Musk has been trying to add subscription revenue and reassure advertisers about the platform’s future. Twitter was losing money before Mr. Musk bought the company, and the deal added a debt burden that requires fresh sources of cash.

It is tough to determine the state of the company. Twitter no longer has to file regular financial reports to the Securities and Exchange Commission, which are crucial tools for determining a company’s financial health.

Analysts and academics have been able to piece together a picture of the company from information Mr. Musk has offered as well as details of the deal and the company’s last regulatory filings. Bankruptcy could be one result. Mr. Musk, the world’s richest person, could also raise new funds, or buy back debt from lenders, giving Twitter a buffer to turn around its business. 

Here is a look at their assessments of Twitter’s financial situation and prospects. 

Twitter Finances, Pre-Musk

Twitter is and was a popular tool for politicians, celebrities and journalists. But as a business, it was stagnating. 

It hasn’t booked an annual profit since 2019, and posted a loss in eight years of the past decade. The company’s net loss narrowed in 2021, to $221.4 million from $1.14 billion the previous year.

Twitter has struggled to attract new users and increase revenue, which came in at about $5.1 billion last year. In its last quarterly filing as a public company, for the period ended June 30, revenue was $1.18 billion, down slightly year-over-year. 

Nearly 90% of its revenue last year came from advertising, and it traditionally has been the company’s main source of revenue. In 2021, Twitter took in $4.51 billion from advertisers, and $572 million from licensing data and other services.

The company had more than $2 billion in cash and less than $600 million in net debt before the takeover talks—very little debt for a company in the S&P 500 index. But that cash position was down 35% from a year earlier as of June 30, filings show, and Mr. Musk paid for Twitter by taking on $13 billion in debt. He paid for the rest in equity, some contributed by multiple investors. 

Twitter had a market capitalization of $37.48 billion in March, the month before Mr. Musk agreed to buy it, S&P data showed. Social-media stocks have slumped sharply since then. But now, according to

Jeffrey Davies,

a former credit analyst and founder of data provider Enersection LLC, “This thing’s probably not worth more than what the debt stack is, quite frankly, unless you put a lot of option value just on Elon.” Mr. Musk last month said he and investors were overpaying for the company in the short term. 

Revenue Under Musk

Mr. Musk said earlier this month that Twitter had suffered “a massive drop in revenue” and was losing $4 million a day. It isn’t clear if that reflects the broader downturn in the digital ad market or the pause in advertising by several companies since Mr. Musk bought the business. 

Some companies, including burrito chain

Chipotle Mexican Grill Inc.,

cereal maker

General Mills Inc.

and airline

United Airlines Holdings Inc.,

have paused their ad spending on Twitter over uncertainty around where the company is headed. The departure of several top executives from its ad department have soured relationships, The Wall Street Journal has reported.

The exodus of advertisers poses a threat for a company so reliant on that revenue stream. “As an online ad company, you’re flirting with disaster,” said

Aswath Damodaran,

a finance professor at New York University’s Stern School of Business. 

Elon Musk has purchased Twitter, ending a monthslong saga over whether or not he would go through with his offer to acquire the social media platform. WSJ takes an inside look at the tweets, texts and filings to see exactly how the battle played out. Illustration: Jordan Kranse

Deal negotiations for long-term contracts that usually begin at the end of the year haven’t taken place yet or have been put on hold. Those deals comprise more than 30% of Twitter’s U.S. ad revenue, The Wall Street Journal reported.

Revenue will likely remain under pressure until advertisers fully grasp the new business model, potentially leading many of them to return to the platform, said

Brent Thill,

a senior analyst at Jefferies Group LLC, a financial-services firm. “Those advertisers will come back if they feel that the users are there and there’s an ability to monetize their advertisement,” Mr. Thill said. 

But that could take time. Mr. Thill said it could take months for advertisers to get clarity. “It’s an enigma,” he said.  

Market-research firm Insider Intelligence Inc. recently cut its annual ad-revenue revenue outlook for Twitter by nearly 40% through 2024. 

Mr. Musk wants the company to lean more on subscriptions and depend less on digital advertising. He said last Tuesday that the company’s upgraded subscription service, costing $7.99 a month, would launch Nov. 29. 

A walkway at Twitter headquarters in San Francisco. The company has aggressively cut staff to reduce expenses.



Photo:

George nikitin/Shutterstock

Reducing Costs

The company has moved quickly to slash costs, including cutting its staff by half. Salaries and other compensation make up a large chunk of overall expenses. The company had 7,500 full-time employees at the end of 2021, up from 5,500 a year earlier, filings show.

The layoffs of roughly 3,700 people could save the company roughly $860 million a year, if the employees that are leaving made an average of about $233,000 annually—the company’s most recently disclosed median pay figure. The estimated savings would represent about 15% of Twitter’s $5.57 billion in costs and expenses last year. Its costs and expenses climbed 51% from the previous year, as hiring drove up its payroll.

More employees left the company last week, rejecting Mr. Musk’s demand that they commit to working “long hours at high intensity” to stay.

Debt Mountain 

Before Mr. Musk’s acquisition, net debt totaled $596.5 million as of June 30, according to S&P Global Market Intelligence, a data provider. That compares with a negative balance of $2.18 billion the prior-year period, indicating a cash surplus.

Twitter paid $23.3 million in interest expense in the quarter ended June 30, according to a filing. 

Now, the company will have to pay at least $9 billion in interest to banks and hedge funds over the next seven to eight years, when the $13 billion in debt matures, according to a review of Twitter’s loans by Mr. Davies, the former credit analyst.

The interest payments are substantial for a company that reported $6.3 billion in total operating cash flow over the past eight years, he said. 

What’s more, the company’s debt stack now includes floating-rate debt, meaning that interest costs are set to rise as the Federal Reserve continues to increase interest rates. Twitter’s debt was entirely fixed rate before the deal. 

Twitter’s credit ratings, which were below investment grade before the transaction with Mr. Musk, have deteriorated further.

Moody’s

Investors Service on Oct. 31 downgraded Twitter’s rating to B1 from Ba2, a two-notch drop, and S&P Global Ratings on Nov. 1 downgraded it to B- from BB+, a five-notch drop. 

If Twitter files for bankruptcy, Elon Musk’s $27 billion investment would likely be wiped out.



Photo:

Susan Walsh/Associated Press

Financial Prospects 

Twitter’s financial challenges could result in the company filing for bankruptcy, raising equity or buying back some debt from its lenders, analysts and academics said. 

If Twitter files for bankruptcy, as Mr. Musk warned was possible in an all-hands meeting earlier this month, his $27 billion investment would likely be wiped out because equity holders are the last to be paid when a company restructures.

Buying back debt from lenders at a steep discount would help the company reduce its debt load and interest costs as well as its valuation, which would be beneficial in the long run, Mr. Davies said. 

“I don’t think they can issue any more debt,” Mr. Davies said. “It’s a really, really tough structure.” 

The company could also replace some of the debt with equity, both from Mr. Musk and from outside investors, said

David Kass,

a finance professor at the University of Maryland’s

Robert H. Smith

School of Business. For that, Mr. Musk would need to persuade potential investors that he has a viable long-term business plan, he said. Replacing debt could enable the company to generate cash. Mr. Musk has said some of his latest

Tesla Inc.

stock sale, yielding almost $4 billion in cash, was because of Twitter. 

If successful, the company could generate positive free cash flow in two or three years, which it could use to pay down the residual debt and eventually go public again, Mr. Kass said. “The prospect of an eventual IPO within three to five years would be a very attractive enticement for large funds,” he said. 

—Theo Francis and Jennifer Williams-Alvarez contributed to this article.

Write to Mark Maurer at mark.maurer@wsj.com

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Business

Facebook Parent Meta Is Preparing to Notify Employees of Large-Scale Layoffs This Week

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Meta Platforms Inc.

META 2.11%

is planning to begin large-scale layoffs this week, according to people familiar with the matter, in what could be among the largest round in a recent spate of tech job cuts after the industry’s rapid growth during the pandemic.

The layoffs are expected to affect many thousands of employees and an announcement is planned to come as soon as Wednesday, according to the people. Meta reported more than 87,000 employees at the end of September. Company officials already told employees to cancel nonessential travel beginning this week, the people said.

The planned layoffs would be the first broad head-count reductions to occur in the company’s 18-year history. While smaller on a percentage basis than the cuts at Twitter Inc. this past week, which hit about half of that company’s staff, the number of Meta employees expected to lose their jobs could be the largest to date at a major technology corporation in a year that has seen a tech industry retrenchment. 

CEO Mark Zuckerberg has said recently that ‘some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year.’



Photo:

Michael Nagle/Bloomberg News

A spokesman for Meta declined to comment, referring to Chief Executive

Mark Zuckerberg’s

recent statement that the company would “focus our investments on a small number of high priority growth areas.”

“So that means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year,” he said on the company’s third-quarter earnings call on Oct. 26. “In aggregate, we expect to end 2023 as either roughly the same size, or even a slightly smaller organization than we are today.”

The Wall Street Journal reported in September that Meta was planning to cut expenses by at least 10% in the coming months, in part through staff reductions.

The cuts expected to be announced this week follow several months of more targeted staffing reductions in which employees were managed out or saw their roles eliminated.

“Realistically, there are probably a bunch of people at the company who shouldn’t be here,” Mr. Zuckerberg told employees at a companywide meeting at the end of June. 

Meta, like other tech giants, went on a hiring spree during the pandemic as life and business shifted more online. It added more than 27,000 employees in 2020 and 2021, and added an additional 15,344 in the first nine months of this year—about a fourth of that in the most recent quarter.

Meta’s stock has fallen by more than 70% this year. The company has highlighted deteriorating macroeconomic trends, but investors have also been spooked by its high spending and threats to the company’s core social-media business. Growth for that business in many markets has stalled amid stiff competition from TikTok, and

Apple Inc.’s

requirement that users opt-in to the tracking of their devices has curtailed the ability of social-media platforms to target ads. 

Last month, investment firm Altimeter Capital said in an open letter to Mr. Zuckerberg that Meta should slash staff and pare back its metaverse ambitions, reflecting the rising discontent among shareholders. 

Meta’s expenses have also risen sharply, causing its free cash flow to decline by 98% in the most recent quarter. Some of the company’s spending stems from heavy investments in the additional computing power and artificial intelligence needed to further develop Reels, Meta’s TikTok-like short-form video platform on Instagram, and to target ads with less data.

But much of Meta’s ballooning costs stem from Mr. Zuckerberg’s commitment to Reality Labs, a division of the company responsible for both virtual and augmented reality headsets as well as the creation of the metaverse. Mr. Zuckerberg has billed the metaverse as a constellation of interlocking virtual worlds in which people will eventually work, play, live and shop. 

Meta has invested heavily in promoting its virtual-reality platform, but users have been largely unimpressed.



Photo:

Guillermo Gutierrez/Zuma Press

The effort has cost the company $15 billion since the beginning of last year. But despite investing heavily in promoting its virtual-reality platform, Horizon Worlds, users have been largely unimpressed. Last month, the Journal reported that visitors to Horizon Worlds had fallen over the course of the year to well under 200,000 users, about the size of Sioux Falls.

“I get that a lot of people might disagree with this investment,” Mr. Zuckerberg told analysts on the company’s earnings call last month before reaffirming his commitment. “I think people are going to look back on decades from now and talk about the importance of the work that was done here.” 

Following the call, analysts downgraded their rating of Meta’s stock and slashed price targets. 

“Management’s road map & justification for this strategy continue to not resonate with investors,” analysts at RBC Capital Markets said in a note last month. 

Write to Jeff Horwitz at jeff.horwitz@wsj.com and Salvador Rodriguez at salvador.rodriguez@wsj.com

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Business

Elon Musk Says Twitter Has Had Massive Revenue Drop as Layoffs Begin

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Twitter Inc. has suffered “a massive drop in revenue” because of advertisers cutting back on using the social-media platform, new owner

Elon Musk

said Friday, as the company started sweeping layoffs just over a week after the billionaire took it over.

Mr. Musk, in a tweet Friday, blamed the cutback in advertising on “activist groups pressuring advertisers.” He said that the company hadn’t changed content moderation and had tried to address activists’ concerns. “Extremely messed up!” he said, casting the pullback as an assault on free speech.

Mr. Musk’s remarks came after several big-name advertisers, including food company

General Mills Inc.,

GIS -0.63%

Oreo maker

Mondelez International Inc.,

MDLZ 0.44%

and

Pfizer Inc.

PFE 0.74%

and others have temporarily paused their Twitter advertising in the wake of the takeover of the company by Mr. Musk, The Wall Street Journal has reported. German car-making giant

Volkswagen AG

said it had recommended to its various brands they pause advertising on Twitter to assess any revisions the company makes to its brand safety guidelines.

Mr. Musk’s tweet comes after Twitter, in a message sent to staff Thursday, said staffers would be notified by 9 a.m. Friday if they had lost their position or were still employed, the Journal reported.

Twitter by early Friday began notifying employees who had been laid off, according to documents viewed by the Journal.

Roughly 50% of Twitter’s workforce has been hit with layoffs, according to an email sent overnight to one of those affected in the U.S. that was viewed by the Journal. It didn’t specify what departments the terminated employees worked in.

Twitter had more than 7,500 employees at the start of this year, according to a regulatory filing.

The staff reductions were intended “to place Twitter on a healthy path,” according to the company’s Thursday email. “We recognize that this will impact a number of individuals who have made valuable contributions to Twitter, but this action is unfortunately necessary to ensure the company’s success moving forward,” the company added.

In the layoff emails, Twitter said employees assigned “nonworking” status would continue to receive compensation and benefits through a separation date, which for one person was designated as early February and for another early January. It said to expect to receive one month’s base pay in severance approximately 45 days after the termination date, in addition to providing instructions for returning company property such as laptops.

Twitter didn’t say whether employees should expect to receive year-end bonuses, which historically have been based on individual and company performance. The company also didn’t mention whether employees would receive equity payments during the nonworking period.

Some employees said they had lost access to Twitter communication tools overnight. An email sent to an employee in Canada and seen by the Journal said that suspended access to the company’s systems didn’t mean the person’s employment has been terminated.

The layoffs cap a tumultuous period for Twitter staff that began in April, when the company disclosed Mr. Musk had become its largest individual shareholder. Mr. Musk then agreed to join Twitter’s board, before deciding not to. He launched a bid for the company that Twitter eventually accepted. Weeks later Mr. Musk raised questions about the deal, then tried to abandon it, before reversing course again last month and saying he would go ahead with the transaction. Along the way, he at times criticized the company and its executives.

The Thursday email said Twitter’s offices would be temporarily closed to ensure the safety of employees, the company’s systems and customer data. Employees who were in an office or on their way to one were asked to go home, according to the email.

Twitter employees have been bracing for job cuts. The Journal previously reported that the company was drafting plans for broad layoffs, with one investor saying up to 50% of staff could be cut and that employees would be evaluated to determine the scope of the firings.

Elon Musk has purchased Twitter, ending a monthslong saga over whether or not he would go through with his offer to acquire the social media platform. WSJ takes an inside look at the tweets, texts and filings to see exactly how the battle played out. Illustration: Jordan Kranse

Signs of pushback against Twitter’s actions emerged in the wake of the apparent dismissals. In a federal lawsuit dated Thursday, a handful of Twitter employees accused the company of violating federal and California law in failing to provide enough warning of a mass layoff.

The lawsuit, filed in California federal court by five former employees of Twitter who said they were terminated this week, said the company’s layoffs violated the federal Worker Adjustment and Retraining Notification Act and its California equivalent, which require giving 60 days of advance written warning of dismissing a large number of employees of a company at once. The lawsuit asked the court to issue an order blocking Twitter from its alleged violations of the acts. Twitter didn’t immediately respond to a request for comment.

In April, as Mr. Musk was moving to buy Twitter, entrepreneur

Jason Calacanis,

a close ally, suggested cutting the number of Twitter employees to roughly 3,000, according to messages between the two, which were released as part of litigation around the transaction.

A staff of 3,000 would represent the lowest level since 2013, the year Twitter went public, when the platform had about 2,700 employees and its revenue was roughly 13% of its level last year.

Twitter’s employee numbers began climbing in 2019, after ranging between approximately 3,000 and 4,000 for several years. Twitter has said that the increase in recent years was driven by investments in engineering, product, design and research.

Even before officially taking control at Twitter, Mr. Musk had indicated that he was concerned about the company’s expenses. Twitter has posted a loss in eight of its past 10 fiscal years, according to FactSet.

Mr. Musk moved quickly to make personnel changes at the top of the company. Last week, on the same day he closed the deal, he fired Twitter Chief Executive

Parag Agrawal

and three other top executives. Mr. Musk fired the executives for cause and is saying he isn’t required to pay them multimillion-dollar severance packages, the Journal reported. Other executives have departed since.

Mr. Musk has leveraged other parts of his business empire to try to put his imprint on Twitter. He brought in some

Tesla

engineers to begin working on reshaping the social-media platform, the Journal reported. Also added to an internal company directory were some people who appeared to work for the Boring Co., a tunneling business Mr. Musk founded.

Broadly, the social-media industry is struggling with weaker revenue from digital advertisers. Such advertising has slowed due to several factors, including rising inflation, the war in Ukraine, and

Apple

privacy changes that have made it harder to track the performance of ads. Twitter rival Snap Inc. this year said it was letting 20% of staff go.

Facebook

parent Meta Platforms Inc. also has indicated it was trimming ranks.

Tech companies beyond social media also have embarked on belt tightening that is leading to job losses and hiring freezes. On Thursday, ride-hailing company

Lyft Inc.

and payments company Stripe Inc. announced major layoffs, and

Amazon.com Inc.

said it would freeze corporate hiring for months.

Write to Sarah E. Needleman at sarah.needleman@wsj.com and Alexa Corse at alexa.corse@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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