Investors punish Mark Zuckerberg after his expensive metaverse presentation fails.
Wall Street is growing impatient with Mark Zuckerberg, the CEO of Meta, for placing such large and risky investments on his metaverse project, which contributed to an increase in the company's overall costs of 5% in the third quarter.
After trading hours, investors raced to sell Meta Platforms Inc.'s shares, driving it down 20% and erasing $67 billion off the company's market worth after it reported its fourth consecutive quarter of declining quarterly earnings.
The Facebook-parent company warned that its overall costs might increase by as much as 16% in the upcoming year and predicted that Reality Labs' operational losses, which are what created the metaverse, "will climb dramatically."
The company's investments, according to one Meta stakeholder, are "super-sized and scary." On Wednesday, analysts described them as "confusing and bewildering" and referred to Meta's inability to reduce expenses as "very troubling".
"I think sort of summing up how investors are feeling right now is that there are simply too many experimental bets vs proven bets on the core," said Jefferies analyst Brent Thill to management on a post-earnings conference call. "I think everyone would want to hear why you think this pays off."
Losses at Reality Labs increased dramatically in the July-September quarter, rising from $2.63 billion to a staggering $3.67 billion. Income virtually fell in half.
On the call, Zuckerberg stated, "It would be a mistake for us to not focus on any of these areas that will be vitally crucial to our future.
'Hey, you're spending all this money and you've built this thing,' people will occasionally comment when we launch a product, and That, in my opinion, is not the best perspective to have.
Over the next five to ten years, "we're performing leading work that will eventually mature products at different cadences in different periods of time."
He discussed the company's numerous initiatives, including the recently released, $1,500 Quest Pro virtual and mixed reality headgear and the social metaverse platform, where users may express themselves through avatars.
He said that Meta is also making investments in brain interfaces and augmented reality.
According to Paolo Pescatore, an analyst at PP Foresight, "the metaverse... feels like a one large bet given the economic crisis," and the trip ahead would be "long and difficult."
People aren't hopping out of their chairs to watch or buy a VR headset 360 video clips... The new gadget still has the sensation of a pricey toy, he claimed.
While other big firms like Microsoft and Alphabet, the parent company of Google, are shedding staff or limiting hiring, Meta's workforce increased 32% from the end of the second quarter to the third.