© Reuters
Meta Platforms Inc., owner of popular social networks such as “Facebook” and “Instagram”, lost $ 67 billion from its capital valuation yesterday. The reason is that investors doubt whether the development of the so-called metaverse is worth the expensive investment.
After another decline in market capitalization of nearly 20%, the monetary size of the losses in the stock market valuation is approaching $ 600 billion, according to “Reuters”.
The disappointing assessment comes as Meta struggles with slowing global economic growth, competition from TikTok, Apple’s privacy changes, concerns about the huge costs of the meta-universe, and the ever-present threat of regulation.
The executives have announced plans to consolidate the offices and have stated that Meta will keep the workforce unchanged until the end of 2023.
But revenue fell 4% in the third quarter ended September 30. This compounded a decline that began in the previous quarter, when the company reported a 0.9% decline in revenue, although it was less strong than the 5.6% decline expected on Wall Street. More worrying was the company’s estimate that fourth-quarter revenue would range from $ 30 billion to $ 32.5 billion, below analysts’ estimates of $ 32.2 billion, according to Refinitiv data.
Total spending for the third quarter exceeded estimates at $ 22.1 billion, up from $ 18.6 billion a year earlier. Meta predicts that total spending throughout 2023 will be between $ 96 billion and $ 101 billion, which is significantly higher than the revised total spending estimate for 2022 of $ 85 billion to $ 87 billion.
Operating losses associated with the Reality Labs unit responsible for metaverse investments will increase in 2023, while $ 10 billion annually is invested in hardware and software for this venture.
CEO Mark Zuckerberg said he expects investments in the metaverse to take about a decade to pay off. An analyst who took part in an investor call with Zuckerberg told him they were concerned the company had made “too many experimental bets” and asked the CEO why he believed his stock would pay off.
Meta executives defended the spending, saying the majority still went to core business, including investments in more expensive AI-related servers, infrastructure, and data centers.
“I appreciate your patience, Zuckerberg said. And I think those who are patient and invest with us will be rewarded in the end.”
