By Katie Paul and Nivedita Balu

(Reuters) – Meta Platforms Inc’s stricter cost controls this year and a new $40 billion share buyback sent shares soaring on Wednesday, as CEO Mark Zuckerberg called 2023 the “Year of Efficiency.”

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

Meanwhile, it will cut costs in 2023 by $5 billion to a range of $89 billion to $95 billion, a steep drop from the $94 billion to $100 billion it previously forecast, and it projected first-quarter sales that could beat Wall Street estimates.

Meta stock surged nearly 19% in after-hours trade. If gains hold on Thursday, it would set up the shares for their biggest intraday surge in a decade and added more than $75.5 billion to its existing $401 billion market capitalization.

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.”

The cost cuts 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, it said in a statement.

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

Meta in November cut more than 11,000 jobs in response, a precursor to 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 doubled in the past six months and the business was on track to roughly break even by the end of 2023 or early 2024 and grow profitably after that, he said on the conference call.

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“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.

Shares of peer Alphabet Inc were up 3.3% while Snap Inc stock rose 1% in after-hours trade on Wednesday.

On the conference call, executives said Meta’s investments in AI-surfaced content and TikTok competitor Reels were starting to pay off. The company also has been using AI to increase automation for advertisers and target ads using less personal data, resulting in higher return on ad spend.

Meta forecast first-quarter revenue between $26 billion and $28.5 billion. That was in with analysts’ average estimates of $27.14 billion, according to Refinitiv.

Zuckerberg said generative AI – technology for producing original prose, imagery or computer code on command – would be the company’s other big theme for this year, alongside efficiency.

Meta was planning to launch several new products that would “empower creators to be way more productive and creative,” he said, while cautioning about the cost associated with 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, compared with $10.29 billion, or $3.67 per share, a year earlier. Analysts had expected a profit of $2.22 per share.

The decline was largely due to a $4.2 billion charge related to cost-cutting moves such as layoffs, office closures and the data center strategy overhaul.

The company previously said it was planning to account for much of that cost in 2023.