Meta has been successful in many of its projects, but it has fallen short when it comes to developments in the metaverse. Despite all the resources poured into its virtual reality arm, it still fails to pull in users to be profitable. After the recent earnings call, the Meta VR project continues to bleed money.
Meta's Dreams of a Virtual Reality and AI
Earnings calls are usually where executives reveal the company's financial status, as well as lay out plans for future endeavors that would make the company grow. They intend to keep the investors happy so that the cash keeps flowing in.
With the recent Meta earnings call, however, investors are disappointed with Meta CEO Mark Zuckerberg's insistence on putting more money into its metaverse project, especially since it has already lost billions prior to the meeting.
As a result, Meta shares have dropped up to 19% in extended trading on Wednesday, as per CNBC, which is equivalent to up to $200 billion in market cap. With the company seeing higher profits and revenue than expected, the drop can only be traced back to Zuckerberg's metaverse plans.
The Meta CEO went on to discuss how there are opportunities for expansion in the mixed-reality headset market, saying that Meta's AR glasses are "the ideal device for an AI assistant because you can let them see what you see and hear what you hear."
Zuckerberg also stated: "I think it's worth calling that out, that we've historically seen a lot of volatility in our stock during this phase of our product playbook where we're investing in scaling a new product but aren't yet monetizing it," citing previous developments like Reels and Stories.
Of course, the earnings call wouldn't be complete without the mention of AI, which has been a hot topic in the tech industry for almost two years. With the aim to build a leading AI, the Meta executive intends to earn from the venture through ads.
In the meeting, Zuckerberg said that there are several ways to build a massive business including scaling business messaging, introducing ads or paid content into AI interactions, and went on to talk about the company's latest large language model, Llama 3.
Metaverse Losses
The reaction of investors is anything but surprising, especially considering the record of Meta's Reality Labs unit's losses. Back in February, the AR/VR division saw its best quarter, but it still translated to losses for the company, as reported by Engadget.
Reality Labs already lost over $16 billion in 2023, and Meta CFO Susan Li explained that these are expected to "increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and our investments to further scale our ecosystem."
It appears that the good is yet to come, given that Reality Labs reported $440 million in sales for the first quarter, but saw $3.85 billion in losses. Between late 2020 to early 2024, the cumulative losses brought by the AR/VR division have already reached $45 billion.
