Meta lost an astonishing $16 billion on the Metaverse last year.
But Wall Street loves Meta as of late Thursday: Its stock is up another 12%.
One big reason: Even with the Metaverse losses, Meta's margins are way better.
Remember when investors were worried that Mark Zuckerberg was incinerating money on the Metaverse and virtual reality?
Well, that's still happening: Last year, Meta lost $16.1 billion on its "Reality Labs" division, which brings you Oculus goggles. That's up from a loss of $13.7 billion in 2022.
Those losses are accelerating, too: In the last quarter of 2023, Meta lost $4.6 billion on the Metaverse.
Zuckerberg is promising investors there's more to come: "For Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and our investments to further scale our ecosystem," Meta said in its most recent earnings release.
But this time around, investors seem cool with Zuckerberg's Metaverse investments. Meta's stock, already at an all-time high, has shot up by some 12% on the news.
Here's an easy answer: Meta says it will continue to buy back its stock — something Wall Street always loves — and, for the first time in its history, it will start rewarding shareholders with dividends.
But the bigger picture is that Meta has spent the last couple of years pushing people out the door and getting out of leases, among other things. And that has improved the company's bottom line — even while Meta is bleeding red ink on the future.
Last year, Meta spent $3.5 billion shrinking itself: $2.5 billion came from "facilities consolidation" — closing and combining offices — and another $1 billion from "severance and other personnel costs" — that is, firing people. The company operates with 67,300 employees, a staggering 22% decrease over the last year.
And all of that means Meta's profit margins are way better: While its revenues increased by 16% — a number most Big Tech companies would be very happy with these days — its operating income increased by 62%, and its profits increased by 69%.
And while Zuckerberg and other Big Tech leaders have said they've been cutting to make their companies more efficient and dynamic, those bottom-line results are the point: They want to show Wall Street they can still increase profits — even if their go-go growth days are behind them, and even if they're still plowing money into new stuff.
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