Alphabet and Snap results have already sounded warnings to the rest of the ad-dependent companies.
It is expected that Meta was going to report poorer results but investors still punished the stock heavily after the actual results were released. Here’s why.
Meta’s revenue fell 4%. In contrast, Alphabet was still able to grow its advertising revenue by 3% (YouTube fell 2% though).
The more amazing thing is that Alphabet’s ad revenue was more than doubled Meta’s and yet it managed to find room to grow.
This just shows that Meta is more vulnerable during this ad slowdown period.
We also know that Zuckerberg is spending billions on the metaverse venture.
The Reality Labs where Meta is spending most of its money, reported a $3.7 billion operating loss, the highest in a quarter (operating losses averaged $2.6 billion previously).
Reality Labs’ revenue of $287 million was also at its lowest since this segment was reported (revenue averaged $591 million per quarter previously).
This shows the demand for its VR headsets has waned significantly.
The lower revenue and increased spending have caused Meta’s net profit to decline 52% from a year ago.
Investors were probably hoping Zuckerberg would abandon the project or at least slow the investments.
Instead he said, “we do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year.”
Investors responded by bashing Meta share price down by 20% during after-market hours.
Is Zuckerberg out of his mind?
As we mentioned earlier, social media tends to be generational and Meta couldn’t capture the younger ones. If Meta doesn’t create a new platform, it will be obsolete eventually, a matter of time.
So we don’t see it as a choice. But could Zuckerberg did something else other than the metaverse? Probably. But it is a vision that an entrepreneur brings to the table and either you believe it or don’t. Most don’t in this case.
If he wins, he will be a hero with foresight. If he loses, he will be a stubborn founder who took silly risks.
What would be the outcome? We think it is too early to judge.
