Wednesday, November 27, 2024

Meta loses $200 billion in value, Zuckerberg focuses on AI, Metaverse

Meta CEO Mark Zuckerberg testifies before the Senate Judiciary Committee on the Dirksen Senate Office Building in Washington, DC on January 31, 2024.

Alex Wong | Getty Images

Mark Zuckerberg began Meta‘s earnings call by talking about artificial intelligence. He then went into the metaverse and promoted his company’s headsets, glasses and operating system. He spent almost the complete opening statement specializing in the various ways Meta loses money.

The investors weren’t interested. Meta shares fell as much as 19% in prolonged trading on Wednesday, wiping out greater than $200 billion in market capitalization. The decline got here despite Meta reporting better-than-expected first-quarter profit and revenue.

Zuckerberg seemed able to sell out.

“I think it’s worth pointing out that we have historically seen a lot of volatility in our stocks at this stage of our product playbook, where we are investing in scaling a new product but not yet monetizing it,” said Zuckerberg. He pointed to previous efforts resembling short-video service Reels, Stories and the move to mobile devices.

Meta generates 98% of its revenue from digital promoting. But when Zuckerberg talked about promoting, he looked to the longer term and the ways the corporate could potentially convert its current investments into promoting dollars. Discussing Meta’s efforts to construct “leading AI,” he said, “There are multiple ways to build a massive business here, including scaling business messaging and introducing ads or paid content into AI interactions.”

He frolicked talking about Meta Llama 3, the corporate’s latest major language model, and the recent launch of Meta AI, the corporate’s answer to OpenAI’s ChatGPT.

Zuckerberg then addressed potential expansion opportunities within the mixed reality headset market, resembling headsets for work or fitness. Meta Access opened on the operating system that powers its Quest headsets on Monday, which Zuckerberg says will help the mixed reality ecosystem grow faster.

He also talked about Meta’s AR glasses, which he called “the ideal device for an AI assistant” because you’ll be able to make them see what you see and listen to what you hear.

The Ray-Ban Meta Headliner data glasses.

Jake Piazza | CNBC

Meanwhile, Meta’s Reality Labs unit, which houses the corporate’s hardware and software for development of the emerging metaverse, continues to bleed. Reality Labs reported first-quarter revenue of $440 million and a lack of $3.85 billion. The division’s cumulative losses for the reason that end of 2020 are over $45 billion.

Zuckerberg bought himself a while.

Meta’s share price nearly tripled last yr and was up 40% in 2024 as of Wednesday’s close. It hit a record high of $527.34 in early April.

After a brutal 2022 wherein the corporate lost about two-thirds of its value, Zuckerberg appears to have regained Wall Street’s trust.

Driving the rally was a cost-cutting plan that Meta CEO laid out early last yr, when he told investors that 2023 could be the “year of efficiency.” The company reduced headcount and eliminated unnecessary projects to develop into a “stronger and more flexible organization.”

Zuckerberg said Wednesday that Meta will proceed to operate efficiently, but that shifting existing resources to speculate in AI will “significantly increase our investment scope.”

Capital spending for 2024 is predicted to be $35 billion to $40 billion, up from a previous forecast of $30 billion to $37 billion, “as we continue to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap.” support,” Meta said.

Zuckerberg said he expects a “multi-year investment cycle” before Meta’s AI products develop into profitable services, but noted that the corporate has a “strong track record” in that department.

Meta Chief Financial Officer Susan Li echoed Zuckerberg’s comments, saying the corporate needed to develop advanced models and scale products before they may generate significant revenue.

“While there is tremendous long-term potential, we are just much earlier on the yield curve,” Li said.

Even before the decision began, investors reduced their holdings. The reason for that is that Meta gave weak sales guidance for the second quarter, dwarfing the primary quarter’s result.

As the plunge intensified, Zuckerberg told investors that they may well be rewarded in the event that they were willing to participate.

“Historically, investing in building these new, scaled experiences in our apps has been a very good long-term investment for us and for investors who have stayed with us, and the early signs are quite positive here too,” Zuckerberg said. “But building leading AI will also be a larger undertaking than the other experiences we have added to our apps, and will likely take several years.”

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