Investors punish Zuckerberg for expensive metaverse pitch falls flat

Oct 26 (Reuters) – Wall Street is losing patience over Meta (META.O) boss Mark Zuckerberg’s huge and experimental bets on his metaverse project that pushed the company’s total costs by a fifth in the third quarter.

Investors rushed to dump the shares of Meta Platforms Inc after hours, dropping it 20% and wiping $67 billion off its market value after the company posted its fourth consecutive quarterly profit decline.

The Facebook parent said total costs could rise by as much as 16% next year and expects operating losses at Reality Labs — the unit responsible for bringing the metaverse to life — to “grow significantly” next year.

A Meta shareholder had recently expressed concern, calling the company’s investments “super-sized and terrifying.” Analysts on Wednesday called them “confusing and confusing” and Meta’s inability to cut costs “extremely troubling.”

During a post-profit conference call, Jefferies analyst Brent Thill asked executives, “I think I think I think I can sum up how investors are feeling right now, which is that there are just too many experimental bets versus proven bets on the core. …I think anyone would. Would love to hear why you think this pays off.”

In the July-September quarter, losses at Reality Labs rose to a staggering $3.67 billion, from $2.63 billion a year earlier. Turnover has almost halved.

“It would be a mistake not to focus on one of these areas that are fundamental to our future,” Zuckerberg said during the call.

“I know that sometimes when we ship a product… people say, ‘Hey, you spend all this money and you produced this thing,’ and I don’t think that’s really the right way to think about it. “

“…we’re doing industry-leading work that will eventually mature products over the next five to ten years with different cadences at different time periods.”

He spoke about the company’s various efforts, including a recently unveiled virtual and mixed reality headset called Quest Pro that costs $1,500 and a social metaverse platform where people can express themselves through avatars.

He said Meta is investing in two other areas: augmented reality and neural interfaces.


“The metaverse … feels like a big gamble given the economic crisis,” said Paolo Pescatore, an analyst at PP Foresight, adding that the journey ahead would be “long and painful.”

“People aren’t rushing out of their seats to buy a VR headset or even watch 360-degree videos… The new device still feels like an expensive toy,” he said.

At a time when other tech companies like Microsoft (MSFT.O) and Google parent Alphabet (GOOGL.O) are cutting jobs or slowing hiring, Meta’s third-quarter workforce grew 32% from the end of Q2. .

In an open letter to Zuckerberg on Monday, Meta shareholder Altimeter Capital Management called on Meta to streamline by cutting jobs and capital expenditures.

The fund suggested Meta limit annual investments in the metaverse to $5 billion instead of the current $10 billion.

Reporting by Chavi Mehta in Bengaluru and Katie Paul in Palo Alto, California, additional reporting by Sheila Dang in Dallas; Writing by Sayantani Ghosh; Editing by Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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