The company’s metaverse division has lost more than $9bn this year and is expected to have further losses in 2023.
Facebook parent company Meta has seen its quarterly profits halve as its metaverse losses continue to mount.
Reality Labs, which handles the augmented and virtual reality operations of the company, recorded a loss of $3.7bn in the third quarter of 2022, a jump from the $2.6bn loss a year ago.
This division has lost more than $9bn in 2022 alone, losing $2.81bn in the previous quarter and nearly $3bn in the company’s first quarter. Meta’s outgoing CFO, David Wehner, said the trend is unlikely to reverse any time soon.
“We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year,” Wehner said in an outlook statement.
“Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run.”
When Meta changed its name last year to show its commitment to the concept of the metaverse, it estimated that investment in this area would be $10bn for 2021 alone, with more to come in the next several years.
The investment is taking a toll on the company’s earnings, however.
Meta’s revenue fell by 4pc in the third quarter to $27.7bn. This is the company’s second revenue dip in a row, with the previous quarter marking Meta’s first ever quarterly revenue drop.
Net income took a significant hit, with a 52pc drop compared to the same period last year, falling to $4.4bn. Meta’s stock fell by more than 19pc in after-hours trading and its stock price has dipped by more than 60pc this year, The New York Times reports.
Meta founder and CEO Mark Zuckerberg said the company is facing “near-term challenges on revenue”, but that the “fundamentals are there” for a return to stronger 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,” he added.
Last month, Zuckerberg told employees that the company was freezing hiring and cutting budgets across teams.
Meta’s social media business is still holding steady. Daily active users across its family of apps – which includes Facebook, Instagram, Messenger and WhatsApp – saw a year-on-year increase of 4pc, reaching 2.93bn.
There are more than 2bn people using WhatsApp every day, while Instagram has reached the milestone of 2bn monthly active users.
The tech giant’s ad revenue saw a year-on-year decline of 4pc as the global ad market continues to crunch.
Microsoft and Google parent Alphabet both took a hit in their latest earnings reports published this week, with advertising issues hitting Alphabet in particular. Spotify also said its margins were squeezed because of “slower-than-forecast advertising growth”.
Back to the metaverse, Wehner said Meta is launching a “consumer Quest headset” next year. After months of teasing, the tech giant revealed the Quest Pro headset in October. Zuckerberg also showed off a demonstration in Meta’s virtual world, but it is likely we don’t have the full picture yet.
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