The stricter cost controls implemented by Meta Platforms Inc this year, as well as a new $40 billion share buyback, sent shares soaring on Wednesday, as CEO Mark Zuckerberg declared 2023 the “Year of Efficiency.”

The parent company of Instagram and Facebook, which has struggled amid a broad post-pandemic slump in digital ads, is focusing on improving its artificial intelligence-powered content recommendations and ad targeting systems to keep users clicking.

Meanwhile, it will reduce costs by $5 billion in 2023 to a range of $89 billion to $95 billion, a significant reduction from the $94 billion to $100 billion previously forecast, and it expects first-quarter sales to exceed Wall Street estimates.

After-hours trading saw a nearly 19% increase in Meta stock. If the gains continue on Thursday, the stock will have experienced its biggest intraday surge in a decade, adding more than $75.5 billion to its current market capitalization of $401 billion.

Zuckerberg described the focus on efficiency as part of the natural evolution of the company, calling it a “phase change” for an organization that once lived by the motto “move fast and break things.”

“We just grew so quickly for like the first 18 years,” Zuckerberg said in a conference call. “It’s very hard to really crank on efficiency while you’re growing that quickly. I just think we’re in a different environment now.”

According to a statement, the cost reductions reflect Meta’s updated plans for lower data-center construction expenses this year as part of a shift to a structure that can support both AI and non-AI work.

As companies cut back on marketing spending due to economic concerns, rivals like TikTok captured younger users, and Apple Inc’s privacy updates continued to challenge the business of placing targeted ads, the digital ad giant faced a brutal 2022.

In response, Meta cut more than 11,000 jobs in November, foreshadowing the tens of thousands of layoffs in the tech industry that followed.

“Our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization,” Zuckerberg said in a statement.

Monetization efficiency for Reels on Facebook, a short-form video format, had more than doubled in the previous six months, and the company was on track to break even by the end of 2023 or early 2024 and then grow profitably, he said during the conference call.

“Meta’s better-than-feared results should refute concerns over the state of the digital advertising industry following Snap’s horrible guidance earlier this week,” said Jesse Cohen, senior analyst at Investing.com.

“Despite all the challenges Meta must deal with, there are signs the business is still doing well,” Cohen said.

Alphabet Inc shares rose 3.3% in after-hours trading on Wednesday, while Snap Inc stock rose 1%.

Executives stated on the conference call that Meta’s investments in AI-surfaced content and TikTok competitor Reels were beginning to pay off. In addition, the company has used AI to increase automation for advertisers and target ads with less personal data, resulting in a higher return on ad spend.

Meta predicts first-quarter revenue of $26 billion to $28.5 billion. According to Refinitiv, this was in line with analysts’ average estimates of $27.14 billion.

Along with efficiency, Zuckerberg stated that generative AI – technology for producing original prose, imagery, or computer code on command – would be the company’s other major theme this year.

Meta intended to launch several new products that would “empower creators to be way more productive and creative,” he said, though he cautioned about the cost of supporting the technology for a large user base.

However, net income for the fourth quarter ended Dec. 31 fell to $4.65 billion, or $1.76 per share, from $10.29 billion, or $3.67 per share, the previous year. Analysts predicted a $2.22 profit per share.

The drop was largely due to a $4.2 billion charge related to cost-cutting measures such as layoffs, office closures, and a rethinking of the data center strategy.

The company previously stated that it intended to account for a large portion of that cost in 2023.

(Adapted from ThePrint.in)