Meta Faces Restructure amid Q3 Profit, Stock Losses

The company prepares to weather the storm with renewed optimism amid its metaverse plans

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Mixed RealityNews Analysis

Published: October 27, 2022

Demond Cureton

Meta Platforms reportedly saw earnings fall 4 percent in the third fiscal quarter (Q3), or $27.7 billion USD compared to the same period last year at $29 billion, its Wednesday quarterly report revealed.

News of the losses triggered a massive Wednesday sell-off of stocks and fall in shares. As of Thursday, Meta’s shares plunged 22 percent.

According to Meta, it expects its Q4 revenues to reach $30 to 32.5 billion USD, with current foreign currencies hitting a roughly 7 percent “headwind to year-over-year total revenue growth.”

It added it was “making significant changes across the board to operate more efficiently” for its 2023 budget.

Restructuring Across the Board

Meta stated its workforce headcount by the end of 2023 would keep “in line with third quarter 2022 levels. Teams across the company would remain flat while others would grow or shrink according to demand, it added.

Additional measures would scrutinise operating expenses, including rationalisation of its office footprint, leading to “incremental costs in the near term.”

“This should set us up well for future years, when we expect to return to higher rates of revenue growth,” the company added.

Meta also plans to spend up to $87 billion in 2022 compared to initial estimates of $88 billion, the report read. It also expects expenses in 2023 to reach up to $101 billion, including $2 billion to consolidate its office facilities footprint.

Explaining further, it said,

“We expect the percentage growth rate of 2023 operating expenses to decelerate meaningfully as we curtail non-headcount related expense growth and keep 2023 headcount roughly flat with current levels. Conversely, our growth in cost of revenue is expected to accelerate, driven by infrastructure-related expenses and, to a lesser extent, Reality Labs hardware costs driven by the launch of our next generation of our consumer Quest headset later next year”

Reality Labs Losses, Tech World Tumble

According to its Q3 fiscal report, the Menlo Park-based firm forecasts its Reality Labs operating losses will “grow significantly year-over-year.” The extended reality (XR) wing would need to pace its investments to reach “growing overall company operating income in the long run,” it added.

Top capital expenses in 2023 would include data centres, networking infrastructure, artificial intelligence (AI), and servers, totalling estimates of up to $33 billion.

Additional factors cited in the report included “uncertainty in the broader economy” due to cuts to digital advertising and rising costs of inflation, it stated.

Meta’s struggles come amid the ongoing tech market tumble, with Alphabet reporting Google advert revenues at $54.5 billion, down $1.8 billion from the previous fiscal quarter at $56.3 billion.

Analysts have cited the economic downturn along with Apple’s privacy measures to request permission before monitoring bespoke digital adverts, reports show.

Silver Lining in the (Data) Cloud?

Speaking at a investors’ call on Wednesday, Meta CEO and Founder Mark Zuckerberg stated the firm would continue its investments in the Metaverse and AI despite the losses.

He stated at the time,

“It would be a mistake for us to not focus on these areas which I think will be fundamentally important to the future. I think that our work here is going to be of historic importance and create the foundation for an entirely new way that we will interact with each other”

He also cited a 4 percent growth in daily active users of Meta’s numerous communication services such as WhatsApp and Instagram, up to 2.93 billion globally.

Meta also reported key successes across its Meta Quest store in October, namely during its Developer State of the Union address at the Connect 2022 event.

It noted milestones such as surpassing $1.5 billion in gaming and app purchases across over 400 apps on the Quest storefront. It also reported over 2,000 apps in its App Lab developer cache with 33 hit tiles reaching $10 million in earnings, among many others.

At the annual event, Zuckerberg also debuted the Meta Quest Pro enterprise headset along with several key and strategic partnerships with massive tech giants such as Microsoft and Zoom.

 

 

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