- Meta’s shares plummeted 22% as a result of its negative results during the third quarter and throughout 2022 it has lost 70% of its value.
- Meta’s metaverse division, Reality Labs, lost more than $3.6 billion US dollars in the third quarter (Q3) of 2022.
- Many critics goaded Meta to abandon its division of the metaverse; considering what happened as “the cost of ambition”.
Meta, previously known as Facebook, has dropped out of the Top 20 Most Valuable Companies in the United States as shares have plunged in the wake of the company’s quarterly results.
The tech giant saw its shares plummet 22% this week in the wake of its poor quarter resultsin fact, throughout 2022, Meta has lost 70% of its value. Nothing more Meta’s metaverse division, Reality Labs, lost more than $3.6 billion US dollars in the third quarter (Q3) of 2022.
During Q3, Meta experienced a 4% drop in revenue along with an increase in costs and expenses of 19% year over year, leading to a 46% reduction in the company’s operating income compared to Q3 2021. Operating margin fell to 20%, compared to 36% a year earlier.
Following the announcement, many critics prompted Meta to abandon its metaverse-focused division, calling what happened “the cost of ambition.”
In the second quarter (Q2) of 2022, Reality Labs had already reported a loss of US$2.8 billion and now during Q3 another US$3.6 billion was lost. So so far this year, the division has lost more than $9.4 billion.
Additionally, Reality Labs revenue was down nearly 50% from the prior year to $285 million US.
The most worrying thing is that Meta expects Reality Labs’ operating losses in 2023 to be even higher and continue to grow year over year. Still, the company plans to ramp up investments now so that in the long run it can boost the company’s overall operating income.
“While we face short-term revenue challenges, the fundamentals are there to return to stronger revenue growth.”said Mark Zuckerberg, CEO of Meta. “We approach 2023 with a focus on prioritization and efficiency that will help us navigate the current environment and emerge as an even stronger company.”.
In accordance with CNBCZuckerberg assured that there are too many things that are happening right now in the world that affect business.
“There are macroeconomic issues, there’s a lot of competition, there are advertising challenges especially coming from Apple, and then there are some of the longer-term things that we’re taking on because we think they’re going to provide higher returns over time.Zuckerberg said. “I appreciate the patience and I believe that those who are patient and invest with us will be rewarded.”
The metaverse is probably one of those things that Meta is betting on long-term because he believes in the potential of the technology. However, at present, this project is one of the elements that destabilizes the company’s financial condition.
Now Meta has a market capitalization lower to companies such as Home Depot, Chevron, Mastercard, Procter & Gamble and Bank of America.
The question is: Will the cost of investing in the Metaverse by Meta pay off in the future?
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