To understand the extent of future expenses we should take a look at Meta's historical CapEx and compare it with the company's forecasts for the following years. We expect Reality Labs expenses will increase meaningfully again in 2023, with the biggest drivers of that being the launch of the next generation of our consumer Quest headset and hiring that has been done in 2022, but for which we are going to be paying the first full year of salaries next year. Here's what he stated during the latest conference call: What's worse is that as Meta's core business experiences a cyclical decline, Mark Zuckerberg continues to double down on Meta's metaverse ambitions. The total losses of Reality Labs for the first 9 months of the year were $9.4 billion, and they would undoubtedly cross the $10 billion mark by the end of the year. At the same time, the poor performance of Reality Labs was also responsible for the decline of the company's overall income, as the department's net loss for the three months was $3.67 billion. ![]() What the Q3 report also showed is that Meta's Reality Labs department, which is responsible for the creation of the company's metaverse projects, generated only $285 million in revenues, down from $558 million a year ago. While some of the decline could be attributed to the decrease in the overall advertising spending that negatively affected Meta's core business, most of it nevertheless was caused by Mark Zukerberg's relentless ambition to make Meta a metaverse company, which continues to come at a high price tag for shareholders. After the results came in, Meta's shares tumbled and are currently down over 30% in comparison to a month ago.ġ-Month Price Return Of Meta's Stock (Seeking Alpha) The report showed that Meta's revenues in Q3 were only $27.71 billion, down 4.5% Y/Y, its net income was 4.4 billion, down 52% Y/Y, and its average price per ad was down 18% Y/Y. Then, two weeks ago, Meta released its Q3 earnings report and provided a long-term outlook, which pretty much disappointed everyone. The Metaverse DilemmaĪ month ago, I wrote a bullish article on Meta in which I highlighted the growth of the company's Reels product and how it's able to help the business to improve its performance amidst a decrease in advertising spending due to the turbulent macroeconomic environment. Therefore, as the street loses confidence while the share price craters, this article aims at highlighting the latest earnings results, showing Meta's remaining competitive advantages, and trying to figure out whether pouring billions into the metaverse could yield any results and reward the shareholders in the future. ![]() Even though those letters are unlikely to shape the boardroom, as Mark Zuckerberg has the majority of the voting power in the company, they nevertheless highlight the overall dissatisfaction by a large pool of investors who believe that the business is moving in the wrong direction. Meta's CEO already faces a shareholder revolt as open letters by investors that call for greater financial discipline are being flown throughout the web. The latest earnings report shows that as the advertising market is in a cyclical decline now might not be a good time to significantly increase capital expenditures and spend resources on a money-burning project that has no guarantee of succeeding anytime soon. Mark Zuckerberg's desire to transform Meta Platforms ( NASDAQ: META) into a metaverse company could either make or break its ability to continue to generate shareholder value in the following years.
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