-
Meta lost a staggering $16 billion to the Metaverse last year.
-
But Wall Street loves Meta on Thursday night: its shares rose another 12%.
-
One big reason: Even with Metaverse losses, Meta margins are much better.
Remember when investors were worried that Mark Zuckerberg was burning money in the Metaverse and virtual reality?
Well, that’s still happening: Last year, Meta lost $16.1 billion on its “Reality Labs” division, the group that offers things like Oculus headsets. That’s up from a loss of $13.7 billion in 2022.
Those losses are also accelerating: in the last quarter of 2023, Meta lost $4.6 billion in the Metaverse.
There’s more to come, Zuckerberg promises investors: “For Reality Labs, we expect operating losses to increase significantly year over year due to our continued product development efforts in AR/VR and our investments to further scale our ecosystem “. Meta said in its most recent earnings report.
But this time, investors seem totally on board with Zuckerberg’s Metaverse investments. Meta shares, which were already at an all-time high, have soared about 12% on the news.
What gives?
Here’s an easy answer: For starters, Meta says it will continue to buy back its shares (something Wall Street always loves) and, for the first time in its history, will begin rewarding shareholders with a dividend.
But the bigger picture is that Meta has spent the last few years pushing people out, canceling leases, etc. And that has improved the company’s results, even as Meta is bleeding red ink over the future.
Last year, Meta spent $3.5 billion to downsize. Of that figure, $2.5 billion came from “facility consolidation” (closing and combining offices) and another $1 billion came from “severance and other personnel costs,” meaning layoffs of people. The company now operates with 67,300 employees, a staggering 22% decrease from last year.
And all of that means Meta’s profit margins are much, much better: While its revenue was up 16% (a number most big tech companies would be very happy with these days), its operating income was up 62% and their profits increased. by 69%.
And while Zuckerberg and other Big Tech leaders have said they’ve been cutting back to make their companies more efficient and dynamic, those bottom lines are largely the point: They want to show Wall Street that they can still grow profits, even whether their big growth days are behind them, and even if they are still investing money in new things.
Read the original article on Business Insider