Tech Giant Meta Beats Revenue Expectations, but Metaverse Losses Mount
Tech giant Meta, the parent company of WhatsApp, Instagram, and Facebook, has surpassed Wall Street’s revenue expectations as the number of users on its platforms continues to grow. However, the company is facing mounting losses in its metaverse project and increased spending on artificial intelligence (AI).
In the second quarter of 2023, Meta’s revenue increased by 11% to $32 billion, exceeding analysts’ expectations of 7% growth. Both Facebook and Meta platforms saw an increase in daily active users, with Facebook’s user base growing by 5% to 2.06 billion on average for the last month. Across all Meta products, daily active users averaged 3.07 billion in June, a 7% increase compared to the previous year.
Despite the positive revenue growth, Meta expects losses to grow in some of its major business segments. The metaverse project, Meta’s signature virtual reality endeavor, will incur further losses due to ongoing product development and investment in scaling up the virtual world. Additionally, the company anticipates increased spending on AI in the coming year.
The second-quarter results also suggest that Meta’s job cuts may not be over. The company’s headcount decreased by 14% from June 2022 to the same month in 2023, with approximately half of the 11,000 job losses already implemented by the end of last month. While Meta claims to have “substantially completed” planned layoffs, it continues to assess facilities consolidation and data center restructuring initiatives.
Despite the reduction in employee numbers, Meta expects payroll costs to rise as it hires “higher-cost technical roles.” The company also anticipates greater expenses, estimated to be between $88-91 billion for the entirety of 2023, due to legal costs incurred in the second quarter, surpassing previous expectations of $86-90 billion.
In May, Meta was fined a record €1.2 billion by the Irish data protection regulator for breaching the General Data Protection Regulations (GDPR). The fine was imposed for transferring EU users’ data to the United States without sufficient protection from US spying agencies, despite a 2020 ruling by the highest EU court.
Earlier this month, Meta launched Threads, a messaging app that rivals Twitter. The app garnered over 100 million users within its first five days of launch.
Overall, Meta’s revenue growth and increasing user numbers demonstrate its continued success in the tech industry. However, the company must address its mounting losses in the metaverse project and carefully manage its expenses to maintain its financial stability.