Meta Profits Slump 23% as Metaverse Bet Continues to Cost the Company Billions

Meta, the parent company of Facebook, has reported a 23% drop in profits due to its growing investment in the metaverse, which is costing the company billions. Despite this setback, Meta remains committed to its bet on the metaverse and the potential it holds for the future of social and digital experiences.

Meta, the parent company of Facebook, reported a 23% decline in profits during its first quarter compared to the previous year, totaling $5.7 billion. Revenue for the quarter increased slightly from last year to $28.6 billion, beating Wall Street’s expectations of $27.7 billion. While Meta’s metaverse push has garnered attention, it primarily earns revenue from advertising, bringing in $28 billion for the quarter. However, Meta’s latest advertising revenue numbers represented an increase compared to the previous year.

Although Meta has laid off thousands of employees and scrapped low-priority projects, its metaverse-focused Reality Labs continued to lose significant amounts of money. During Meta’s first quarter, Reality Labs had a loss of $3.9 billion, compared to $2.9 billion in losses during the same period last year.

Despite the hard times, Zuckerberg stated that the metaverse remains “central to defining the future of social connection,” but that the company would lean heavily into AI as its “single largest investment,” following the success of OpenAI’s ChatGBT.

Immediately following the earnings report’s release, Meta’s share price jumped, up 12% during after-hours trading to $233. It is worth noting that since adopting its new name, Meta’s stock price has fallen drastically. When the company announced its rebrand in October 2021, its stock traded at around $316 per share compared to just over $209 at markets’ close.

In conclusion, while Meta is focused on both the metaverse and AI, AI is currently the priority for the company as it faces a challenging business environment and tough competition from social media platforms like TikTok.

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