Mark Zuckerberg’s move to turn Facebook, a major player in social media and a household name, into a full-on Metaverse company called “Meta,” wasn’t exactly a hit with shareholders. The stock price has been pretty tumultuous lately, and many have begun to question Zuckerberg’s decisions and whether or not his obsession with the Metaverse will spell the end of Facebook.
If Meta’s Q2 earnings report is any indication, they may have a point. Meta posted a $2.8 BILLION dollar loss for their Reality Labs division in just the 2nd quarter alone. Couple that with the recent announcement of layoffs and tighter oversight of the workforce, and detractors may have a point. With consumer confidence wavering, does all of this lead to doom and destruction for Mark Zuckerberg? Should we be worried about the future of Meta?
Let’s take a closer look at the details and find out.
Examining the Report
In order to understand the current financial report, let’s add some relevant historical context to the numbers. In the most recent quarter (Q2), Meta’s Facebook Reality Labs (FRL) division posted a loss of $2.8B. While that may seem like a large number, it’s not abnormal for FRL. In fact, in Q1, FRL posted a loss of $2.9B, slightly higher than their most recent number. Where this might get concerning is when you look at revenue.
Meta’s posted revenue for Q2 was only $452 Million, down considerably from the $695 Million in revenue they posted in Q1. Not only that, but Meta says that Q3 revenue will be down even more, potentially leading to greater losses in their next quarterly financial report. To add to that, earnings per share came in at $2.46, slightly lower than analysts estimated $2.54 per share.
Not all of the data was bad however. Total revenue for Meta came in at $28.8B, and net income came in at $6.7B for the quarter. While this is a slight decline over the previous quarter, it shows that Meta as a whole is still highly profitable and isn’t exactly bankrupt. Despite that, Meta’s stock price is down around 4.3% in after-hours trading and sitting at about $162 per share. Reading this, it’s obvious that the bad news outweighs the good in their report, so that begs the question: Should investors be worried?
Hope for the Future and Zuck’s Conviction
While many believe Mark Zuckerberg has gone off the deep end and is throwing money into a virtual dumpster fire, Zuckerberg himself seems unimpeded in his conviction that the Metaverse is the future of the company. Right or wrong, this IS the face of Meta now, and the company isn’t worried about the short-term picture. In their quarterly earnings announcement, Zuckerberg himself had this to say:
Developing the Metaverse could unlock hundreds of billions, if not trillions in revenue over time.
Couple that with his Q1 statement that Meta is in this for the long haul and has a decade-long plan to roll out the future of the Metaverse, it would appear that the company is going head-first down this particular rabbit hole, dumpster fire or not, and will be doing so well into the 2030s and beyond. For those who believe in the Metaverse, this creates an extremely intriguing long-term play, especially with the recent decline in stock prices. For others, it’s too much of a risk for a company that was seen as a major player in the past for their social media efforts with Facebook and Instagram.
At MSQ, we are huge fans of the Metaverse and believe it is the future of virtual interaction and the internet, but what do you think? Do you agree with the shareholders and think Meta should stick to what made them famous? Or are you all-in on the Metaverse? Let us know your thoughts!