While Mark Zuckerberg's bet on virtual reality could still pay off, it's definitely been an expensive gamble: Meta said Wednesday that its Reality Labs division had a $4.28 billion operating loss in the fourth quarter of 2022, bringing its losses for the year to $13.7 billion, CNBC reports. With sales of VR headsets falling, the division generated $2.16 billion in revenue, down slightly from 2021. More:
- Meta stock still went up. Despite reporting drops in profits and revenue, Meta's stock, which fell by more than 50% in the last year, jumped nearly 20% in after-hours trading, partly because its revenue beat analysts' modest expectations and partly because it announced a $40 billion stock buyback plan, which will boost earnings per share, Quartz reports.
- An "unfortunate reality." The 1% decline in Meta's revenue from 2021 to 2022, which followed a 37% rise from 2020 to 2021, was its first-ever year-on-year drop and analysts say the company has a lot of work to do to turn thing around. "Now the challenge is to return to positive territory. Meta needs to stay focused on stabilizing its core platforms, Facebook and Instagram," says Insider Intelligence analyst Debra Aho Williamson, per the AP. "And with losses at its VR division mounting, Mark Zuckerberg is going to have to accept an unfortunate reality: Virtual worlds are simply not what businesses or consumers want right now."
- Losses could be even bigger in 2023. After financial results were released Wednesday, Meta execs said the company had no plans to abandon its vision of the "metaverse," Insider reports. "None of the signals that I've seen so far suggest that we should shift the Reality Labs strategy long-term," said Zuckerberg. "We are constantly adjusting the specifics of how we execute this." Asked whether losses had peaked, CFO Susan Li said, "We expect our full year Reality Labs losses to increase in 2023 and we're going to continue to invest meaningfully in this area given the significant long term opportunities that we see."
- User numbers are still growing. Meta said Facebook daily users hit 2 billion for the first time in 2022, up 4% from the previous year, the AP reports. The company said monthly users across the Instagram, Facebook, WhatsApp, and Messenger "family" of apps reached 3.76 billion in December.
- Layoffs were just the start of "year of efficiency." Zuckerberg said Wednesday his management theme for 2023 is "the year of efficiency" and mass layoffs announced in November were just the beginning of an austerity program. "We’re going to be more proactive about cutting projects that aren’t performing or may no longer be as crucial, but my main focus is on increasing the efficiency of how we execute our top priorities," he said, per Quartz.
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