Meta Platforms’ latest earnings report shows that the company’s bet on the metaverse has yet to pay off.
Meta Q3 Earnings Fundamentals report It doesn’t inspire confidence in the company’s recent operations. That number is down 4% from the same period in 2021, despite generating $27.7 billion in revenue.
This decline is exacerbated when considering expenses that increased by approximately 20% compared to Q3 2021. Overall, net income he fell 52% to $4.4 billion from $9.2 billion last year.
Meta’s stock price climbed to around $140, but those gains quickly evaporated by about 25% in after-hours trading.
Reality Checks from Reality Labs
Meta’s disappointing third quarter results could be largely attributed to its spending on Reality Labs.operating loss The company’s division responsible for virtual and augmented reality projects has reached $3.7 billion.
That number increased from $2.8 billion in the prior quarter to a total of $9.4 billion for the full year. Meanwhile, Reality Labs’ earnings stayed at his $285 million, down from his $558 million the year before.
Still, Meta Platforms management was not entirely surprised by the negative results. In fact, the company’s chief financial officer, Dave Whener, said the trend is likely to continue.
In its latest quarterly report, he said the company expects Reality Labs’ operating loss to “increase significantly year-over-year” in 2023.
But after that, the company intends to “pace its investment in Reality Labs” in order to continue to grow its operating profit over the long term.
Zack’s Meta Metaverse Conviction
Despite the loss, CEO Mark Zuckerberg also delivered on the results Meta experienced last quarter.For example, the company’s reportedly most popular pair of applications achievement new milestone.
The photo-sharing app Instagram has more than 2 billion active users on a monthly basis. Moreover, Meta’s encrypted messaging app WhatsApp was able to achieve this same number on a daily basis.
To compete with rival viral apps, Zuckerberg said recommendations will focus more on driving users’ feeds. He described this potential change in the company’s service as being more of a “discovery engine.”
But Zuckerberg remains adamant about the company’s metaverse ambitions, saying that investing in the “next computing platform” remains a top priority.
He considers the development of the Metaverse to be “historically significant”, adding that it could ultimately lead to a paradigm shift in the way societies interact with each other.
In fact, Zuckerberg had already achieved this by creating and mainstreaming Facebook, the world’s largest social network.
Investor Questions Begin to Surface
But while Zuckerberg is confident, the chorus of skeptics is growing louder. One analyst equated Zuckerberg’s belief in the Metaverse with Jack’s belief in magic beans, saying, “metaverse beanstalk”
One of the loudest voices of disapproval came from one of the company’s most prominent shareholders.in the open letterAltimeter Capital’s Brad Gerstner said Meta needs to embrace the changed financial landscape.
Gerstner expressed a firm belief in Zuckerberg, but he also proposed some solutions himself. First, he recommended layoffs. Zuckerberg confirmed that the company will do so within the next year.
Ultimately, however, Gerstner said the company should limit its annual investment in Reality Labs to $5 billion. On this last point, Zuckerberg is unlikely to relent.
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