Meta, a Big Five tech company, continues to burn cash through its metaverse research and development division, Reality Labs, as it reported a $3.67 billion loss for the third quarter of 2022, and claims those losses will deepen further next year.
The company’s third-quarter 2022 earnings, released Oct. 26, show Reality Labs’ biggest quarterly loss since earnings dating back to fourth-quarter 2020, when the business also made $285 million in revenue for the third quarter, its lowest record at that time.
As the Reality Labs business marks its third consecutive quarterly loss totaling $9.44 billion so far in 2022, Meta is shaping up to top its 2021 losses from its metaverse division, which saw just over $10 billion in losses last year.
Those year-over-year losses will deepen, as Meta CFO Dave Whener stated in the results:
“We anticipate Reality Labs operating losses in 2023 to grow significantly year over year. Beyond 2023, we expect the investments in Reality Labs to be made at a pace that allows us to achieve our goal of growing the company’s long-term operating income.”
At Meta’s earnings call, its CEO, Mark Zuckerberg remained undeterred by the company’s huge investment in what he called the “next computing platform.” He said it was the firm’s top priority, telling investors that building a metaverse and its related hardware is “a massive undertaking.”
“It’s often going to take a few versions of each product before it becomes popular,” he added. “I think our work here is going to be historically significant and lay the foundation for a whole new way of interacting with each other and integrating technology into our lives, as well as the foundation for our long-term business.”
Usually, The company slightly beat Wall Street analysts’ expectations for revenue, posting revenue of $27.71 billion in the quarter, but made earnings per share of $1.64, below its estimate of $1.88 per share.
Meta’s stock price is down over 19.5% in post-trading at the time of writing, according to Yahoo Finance, and shares of the company have fallen more than 61.5% since the start of 2022.
Meta’s big bet on its virtual world has led some investors to urge the firm to reduce its investment; Brad Gerstner, founder of technology investment firm Altimeter Capital and a Meta shareholder, wrote an open letter to Zuckerberg and the board of directors.
Gerstner said his “investment in an unknown future is oversized and terrifying” and that it could take a decade for his metaverse to start paying off, so the firm should focus on an artificial intelligence offering, as it has the potential to improve the company’s bottom line.
Some are not optimistic about the future of the metaverse in Zuckerber’s hands. Meta’s whistleblower Frances Haugen said in April that her virtual world will repeat “all the harm of Facebook” if the company does not commit to transparency.
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