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Meta’s Value Drops Over $65 Billion Amid Falling Revenues and Rising Costs

Investors wiped more than $65 billion off Meta’s market capitalization on Wednesday after the Facebook owner reported another quarter of declining revenue and failed to convince investors that the deals Big bets on metaverse and artificial intelligence are succeeding.

Share in Meta 19% drop in after-hours trading as the world’s largest social media platform joins other major Tech groups warning that the recession is hitting their advertising businesses as Brands spend less on marketing.

In addition to broader macroeconomic issues, Meta faces a myriad of challenges, including growing competition for its Instagram platform from rivals such as short-form video app TikTok and other challenges. difficulty in targeting and measuring ads due to Apple change privacy policy.

The company said it expected revenue for the current quarter to be in the $30 billion to $32.5 billion range, compared with analyst expectations of $32.2 billion.

Third-quarter net income fell 52% to $4.4 billion, below the consensus estimate of $5 billion, according to S&P Capital IQ. Meanwhile, revenue fell 4% to $27.71 billion, the slowest rate of growth since going public in 2012, after falling 1% in the previous quarter. The figure was slightly better than analysts’ estimates for a 5% drop.

Mark Zuckerberg, Meta founder and chief executive officer, warned the company faced “short-term challenges in revenue” but said “fundamentals are there to get back to revenue growth”. stronger”.

On a call with analysts, he doubled his biggest bet including developing a short video format to compete with TikTok, business messaging, and the metaverse. He tries to reassure investors that investments in these areas will pay off in the long run.

“I appreciate patience and I think those who are patient and invest with us will be rewarded in the end,” he said, arguing that the company is doing “top work” on the metaverse. “of historical importance”.

Meta’s disappointing earnings came amid a flurry of big tech stocks selling off. Shares of Alphabet, Google’s parent company, fell more than 9% on Wednesday after reporting an unexpectedly severe decline in its core search advertising business, while Snap shares lagged. sloped last week after the company posted its slowest growth rate since going public in 2017.

Meta, which has expanded its population rapidly during the pandemic, has faced investor scrutiny for spending heavily on Zuckerberg’s vision of building a world full of shapes. digital representation known as the metaverse. Like other augmented and virtual reality projects Meta is working on, this is not expected to turn a profit for many years.

Revenue from Reality Labs, its metaverse unit, nearly halved in the third quarter to $285 million during a loss of $3.7 billion from $2.6 billion a year ago. The company said it expected operating loss in the unit to “increase significantly year-on-year” in 2023.

“Meta is standing strong when it comes to the state of its business,” said Debra Aho Williamson, an analyst at Insider Intelligence. “Zuckerberg’s decision to focus his company on the future promise of the metaverse has taken his attention away from the unfortunate realities of today.”

The company estimates total costs in 2022 will be between $85 billion and $87 billion, down from a previous estimate of $85 billion to $88 billion. However, they predict costs in 2023 in the range of $96 billion to $101 billion despite recently looking to cut costs and freeze most hiring.

The company said it is “implementing significant changes across its board of directors to make it more efficient” and has “intensified oversight of all areas of operational costs”.

But it warns “these moves. . . It will take time to entertain” and some efforts to find savings, such as shrinking office space as more employees work from home, will lead to “increased costs in the near term.” “.

Zuckerberg told analysts that investing in its artificial intelligence capabilities has contributed to increased capital spending, but the technology will, for example, help increase views for the short video format.

Analysts also raised concerns about rising costs. “The overall feeling investors are getting right now is that there are too many test bets versus proven bets at the core,” said Brent Thill, an analyst at Jefferies. analyst at Jefferies said.



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