Investors chastise Zuckerberg as pricey Metaverse pitch collapses

Oct 26 (Reuters) – Wall Street is losing patience with the meta (META.O) Boss Mark Zuckerberg’s ambitious and experimental efforts at his MetaWare project helped boost the company’s overall costs by a fifth in the third quarter.

Investors rushed to dump Meta Platforms Inc shares after hours, sending it down 20% and wiping $67 billion off its market value.

The Facebook-parent said its overall expenses could rise as much as 16% next year, and that it expects Reality Labs — the unit responsible for bringing Metaverse to life — to “grow significantly” next year.

A Meta shareholder recently called the firm’s investments “excessive and terrifying.” Analysts on Wednesday called them “confusion and confusion” and Meta’s inability to cut costs “extremely troubling.”

In a post-earnings conference call, Jefferies analyst Brent Dill asked executives: “To sum up how investors feel right now, there are a lot of testing challenges against proven bets at the core … I think. I’d like to hear why you think it’s paying off.”

In the July-September quarter, Reality Labs’ losses widened to $3.67 billion from $2.63 billion a year earlier. Revenue halved.

“It would be a mistake not to focus on any sector that is fundamentally important to our future,” Zuckerberg said on the call.

“I know, sometimes when we ship a product … people say: ‘Hey, you’re spending this money, and you’ve produced this,’ and I don’t think that’s the right way to think about it.”

“…which will become mature products at different times over the next five to 10 years.

He talked about the company’s various initiatives, including the recently released virtual and mixed reality headset called Quest Pro, priced at $1,500, and the social Metaverse platform where people can express themselves through avatars.

Meta is also investing in two other areas: augmented reality and neural interfaces.

Big gamble

“MetaWare … feels like a big gamble during the economic crisis,” said Paolo Pescador, an analyst at BP Forsyth, adding that the journey ahead will be “long and painful.”

“People aren’t getting out of their seats to buy VR headsets or watch 360-degree videos…the new device still feels like an expensive toy,” he said.

Other tech companies like Microsoft at a time (MSFT.O) and Google-parent Alphabet (GOOGL.O) As jobs are cut or hiring slows, Meta’s numbers increased 32% in the third quarter from the second quarter.

In an open letter to Zuckerberg on Monday, Meta shareholder Altimeter Capital Management called for Meta to streamline by cutting jobs and capital spending.

The fund recommended increasing annual investments in Metaverse to $5 billion from the current $10 billion.

Additional reporting by Savi Mehta in Bangalore and Katie Paul in Palo Alto, Calif., Sheila Tang in Dallas; Written by Sayantani Ghosh; Editing by Sam Holmes

Our Standards: Thomson Reuters Trust Principles.

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