Bear in mind when buyers have been frightened that Mark Zuckerberg was incinerating cash on the Metaverse and digital actuality?
Nicely, that is nonetheless taking place: Final 12 months, Meta misplaced $16.1 billion on its “Actuality Labs” division, the group that brings you issues just like the Oculus goggles. That is up from a lack of $13.7 billion in 2022.
These losses are accelerating, too: Within the final quarter of 2023, Meta misplaced $4.6 billion on the Metaverse.
There’s extra to come back, Zuckerberg is promising buyers: “For Actuality Labs, we count on working losses to extend meaningfully year-over-year as a result of our ongoing product growth efforts in augmented actuality/digital actuality and our investments to additional scale our ecosystem,” Meta mentioned in its most up-to-date earnings launch.
However this time round, buyers appear completely cool with Zuckerberg’s Metaverse investments. Meta’s inventory, which was already at an all-time excessive, has shot up some 12% on the information.
What provides?
This is a straightforward reply: For starters, Meta says it’ll proceed to purchase again its inventory — one thing Wall Road all the time loves — and, for the primary time in its historical past, it may begin rewarding shareholders with a dividend.
However the larger image is that Meta has spent the final couple of years pushing individuals out the door, getting out of leases, and so forth. And that has improved the corporate’s backside line — even whereas Meta is bleeding crimson ink on the longer term.
Final 12 months, Meta spent $3.5 billion shrinking itself. $2.5 billion of that got here from “services consolidation” — closing and mixing places of work — and one other $1 billion on “severance and different personnel prices” — that’s, firing individuals. The corporate is now working with 67,300 workers, a staggering 22% lower during the last 12 months.
And all of that signifies that Meta’s revenue margins are method, method higher: Whereas its revenues elevated by 16% (a quantity most Massive Tech corporations can be very pleased with lately), its working earnings elevated by 62%, and its earnings elevated by 69%.
And whereas Zuckerberg and different Massive Tech leaders have mentioned they have been reducing to make their corporations extra environment friendly and extra dynamic, these bottom-line outcomes are very a lot the purpose: They need to present Wall Road that they’ll nonetheless improve earnings — even when their go-go progress days are behind them, and even when they’re nonetheless plowing cash into new stuff.
