Stocksak: Zuckerberg’s costly metaverse pitch is rejected by investors

© Stocksak. FILEPHOTO: This illustration was taken November 2, 2021 and shows a 3D printed Facebook rebrand logo Meta. REUTERS/Dado Ruvic/Illustration

By Chavi Mhta and Katie Paul

(Stocksak). Wall Street is losing patience with Mark Zuckerberg, Meta boss, for his huge and experimental bets on the metaverse project. These bets helped drive up the company’s overall costs by a fifth during the third quarter.

After Meta Platforms Inc reported a fourth straight quarterly loss, investors rushed for Meta Platforms Inc stock to be sold. The stock fell 20% and its market value dropped $67 billion.

According to the Facebook-parent, its overall expenses could rise by as much as 16% next fiscal year. Reality Labs, the unit responsible for bringing about the metaverse to life, is expected to experience operating losses that “will grow significantly” in the next fiscal year.

Meta shareholders recently expressed concerns about the company’s investments, calling them “super-sized” and “terrible”. On Wednesday, analysts called them “confusing” and “confounding” and Meta’s inability to reduce costs “extremely concerning”.

Thill, a Jefferies analyst asked executives on a conference call following earnings: “I think that kind of sums up how investors feel right now is the fact that there are just too few experimental bets versus proved bets in the core. I think everyone would love the explanations of why you believe this pays off.

Reality Labs’ July-September quarter losses jumped to $3.67 billion, from $2.63 billion one year earlier. Revenues nearly doubled.

Zuckerberg stated on the call that “it would be a mistake for me to not focus on any one of these areas which will be fundamentally essential to our future.”

“I know that people sometimes say to me, “Hey, you spend all this money and you produced this thing.” I don’t think that is the right way of thinking about it.

“…we are leading work that will eventually mature products at different times and in different cadences over the next five to ten years.”

He spoke about the company’s many efforts, including a recently launched virtual and mixed reality headset called Quest Pro, which is priced at $1500, and a social metaverse platform that allows people to express themselves through avatars.

He stated that Meta invests in two additional areas: augmented realities and neural interfaces.


“The metaverse… feels as a one-big gamble given the economic crisis,” said Paolo Pescatore of PP Foresight. He also stated that the journey ahead was going be “long, painful.”

“People aren’t rushing to buy VR headsets or watch 360-degree videos. He said that the new device still feels expensive.

Meta’s headcount increased 32% in the third trimester, compared with the second quarter. This is at a time when tech companies such as Microsoft and Google-parent Alphabet (NASDAQ;) are cutting jobs or slowing down hiring.

Altimeter Capital Management, Meta shareholder, wrote Monday an open letter to Zuckerberg requesting that Meta streamline its capital expenditure and jobs.

The fund suggested that Meta cap annual investments in metaverse would be increased to $5 billion, instead of the current $10 Billion.

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Stocksak Editorial

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