Meta, the company behind the metaverse, posted its fourth-quarter earnings report on Wednesday, revealing an operating loss of $4.28 billion for Reality Labs. This loss is wider than the previous quarter’s loss of $3.3 billion, but slightly narrower than analysts’ expectations of a loss of around $4.36 billion. Despite the loss, Meta’s stock jumped nearly 19% in after-hours trading due to its strength in its user base and planned cost-cutting measures.
Investors’ Criticism
Reality Labs has consumed more than $13.7 billion in the past 12 months, causing investors to voice their concerns over Meta’s decision to continue funding the metaverse. In October, one investor even wrote an open letter to Meta titled “Time to Get Fit,” advising the company to limit its metaverse spending.
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CEO and CFO’s Response
During a Q&A session after announcing the earnings results, CEO Mark Zuckerberg stated that he does not detect any indications for a change in Reality Labs’ strategy and that the company continuously adjusts its execution. Meanwhile, CFO Susan Li responded to a listener’s question about expected losses at Reality Labs in 2023 by saying that the company still expects losses to increase this year and will continue to invest significantly in the area due to its significant long-term opportunities.
Investment in Reality Labs
In December, CTO Andrew Bosworth wrote a blog post titled “Why we still believe in the future,” articulating that Meta would continue investing 20% of its spending in Reality Labs. However, in an internal email sent in late December, Bosworth reportedly told the 18,000 members of Reality Labs that the company has solved too many problems simply by “adding headcount.” Despite the losses, Meta’s stock shot up 19% after hours, indicating that many investors are disregarding losses in a division that accounts for just over 2% of the company’s revenue.
Meta’s Reality Labs division has posted wider losses than expected, causing concern among investors. However, the company’s CEO and CFO remain confident in their investment in the metaverse and its long-term opportunities.
