Disappointing Quarter for Meta Results in Heavy Loss on Stock Exchange

Metaverse might be embedded in the company's name, but the next virtual world is bringing a heavy burden on the Facebook parent. The company's third-quarter results failed to convince investors that its bet on the metaverse is bearing fruit.

Slowing revenue growth and a sizeable net income drop contributed to more than $65 billion being wiped from the company’s market capitalization after the 3Q22 earnings report. Following the release of its earnings, shares in the company dropped as much as 19% in the trading, adding to around $500 billion in value lost over 2022. Meta is not the only big tech company facing struggles, with the sector in particular hit hard by the economic downturn. Instagram also faces intensifying competition from TikTok, while the company as a whole is encountering difficulties in the advertising segment due to Apple’s privacy policy changes.

Numbers in Q3 did not make good reading as revenue declined 4% year-on-year to $27.7 billion. Net income dropped 52% to $4.4 billion, while its costs and expenses ramped to $22 billion, a 19% increase. Revenue from metaverse unit Reality Labs halved to $285 million, while losses rose to $3.7 billion, from $2.6 billion. In Q4, the company said its total revenue would be in the range of around $30 billion to $32.5 billion, while total expenses in 2022 would be in the range of $85 billion to $87 billion. As it funds advancements in the metaverse and AI, 2023 expenses are expected to rise to between $96 billion to $101 billion.

Company CFO David Wehner noted in an earnings statement that the company was making significant changes across the board to operate more efficiently, including taking action on headcount and increasing scrutiny on other operating expenses. Senior director of product development Austin Chang said that the company remains unwavering in its commitment to metaverse development, despite a storm following the earnings release.