Facebook parent company, Meta’s shares declined by18% in after-hours trading, after the company recorded a second quarter revenue contraction, as investors expressed concerns over the company's exorbitant metaverse costs.
In the social media group’s latest quarterly earnings posted yesterday, Meta announced a disappointing outlook, noting it expects lower revenues in the fourth quarter of 2022, and it plans to pump significant investments into its metaverse strategy next year.
The announcement saw Meta stock sink by $67 billion off its stock market value in extended trade, pouring fuel to fire, with the company having already lost more than half a trillion dollars in value this year.
The declining revenue comes amid Meta executing its vision for the metaverse: the “next frontier of the social media platform, which seeks to create an embodied internet” where users interact and live in an immersive experience and are not just viewers.
In 2021 alone, Meta spent over $10 billion designing its own metaverse.
Revenue fell 4% in the third quarter ended 30 September. This, after the company’s revenue fell by 0.9% the previous quarter.
"While we face near-term challenges on revenue, the fundamentals are there for a return to stronger revenue growth. We're approaching 2023 with a focus on prioritisation and efficiency that will help us navigate the current environment and emerge an even stronger company," says Mark Zuckerberg, Meta founder and CEO, in the quarterly earnings report.
“We anticipate our full-year 2023 total expenses will be in the range of $96.1 billion. This includes an estimated $2 billion in charges related to consolidating our office facilities footprint.”
The world’s biggest social media site faces numerous contenders including Google in the advertising space; as well as TikTok and Twitter in the social media arena as it faces intense scrutiny from regulators over privacy and competition laws, user security issues, fake news and hate speech, with growing calls from activists for Facebook to be subjected to statutory regulation.
According to BanklessTimes.com, TikTok could overtake Facebook in less than four years’ time in user growth.
While the Facebook community continues to grow, with strong engagements driven by progress its discovery engine and features like Reels, the company says it expects the percentage growth rate of 2023 operating expenses to decelerate “meaningfully” as it curtails non-headcount-related expense growth and keeps 2023 headcount roughly flat with current levels.
“Conversely, our growth in cost of revenue is expected to accelerate, driven by infrastructure-related expenses and, to a lesser extent, Reality Labs hardware costs driven by the launch of our next generation of our consumer Quest headset later next year,” stated Zuckerberg.
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