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Meta loses $200 billion in value as Zuckerberg focuses earnings call on all the ways company bleeds cash

Mark Zuckerberg began Meta’s earnings call by discussing artificial intelligence. Then he moved on to the metaverse, promoting his company’s headsets, glasses, and operating system. He spent nearly the bulk of his introductory remarks discussing the various ways Meta loses money.

Investors didn’t like it. Meta shares fell as much as 19% in late trading on Wednesday, wiping down more over $200 billion in market capitalization. The dip occurred despite Meta reporting higher-than-expected profit and revenue in the first quarter.

Zuckerberg seems prepared for the sell-off.

“I think it’s worth calling that out, that we’ve historically seen a lot of volatility in our stock during this phase of our product playbook where we’re investing in scaling a new product but aren’t yet monetizing it,” he added. He mentioned previous efforts such as the short-video service Reels, Stories, and the move to mobile.

Meta earns 98% of its revenue from digital advertising. But, to the extent Zuckerberg discussed ads, he was looking ahead to the future and how the corporation may potentially convert its current spending into ad revenue. In describing Meta’s efforts to create a “leading AI,” he stated, “There are several ways to build a massive business here, including scaling business messaging, introducing ads or paid content into AI interactions.”

He spent time discussing Meta Llama 3, the company’s latest large
language model, as well as the recent release of Meta AI, the company’s response to OpenAI’s ChatGPT.

Zuckerberg then discussed prospective opportunities for expansion in the mixed reality headset sector, such as a headset for business or fitness. On Monday, Meta made the operating system that powers its Quest headsets available to the public, which Zuckerberg hopes would accelerate the growth of the mixed reality ecosystem.

He also praised Meta’s augmented reality glasses, calling them “the ideal device for an AI assistant because you can let them see what you see and hear what you hear.”

Meanwhile, Meta’s Reality Labs unit, which contains the company’s technology and software for developing the nascent metaverse, is losing money. Reality Labs reported first-quarter sales of $440 million and losses of $3.85 billion. The division’s total losses since the end of 2020 have exceeded $45 billion.

Zuckerberg has saved himself some time.

Meta’s stock price nearly tripled last year, and as of Wednesday’s end, it was up 40% in 2024. In early April, it hit a record high of $527.34.

Following a harsh 2022, in which the business lost over two-thirds of its value, Zuckerberg appears to have regained Wall Street’s faith.

The surge has been driven by a cost-cutting plan implemented by the Meta CEO early last year, when he assured investors that 2023 would be the “year of efficiency.” The corporation reduced headcount and eliminated unneeded projects in order to create a “stronger and more agile organization.”

Zuckerberg said on Wednesday that Meta will continue to run effectively, but that moving existing resources to AI investments will “significantly expand our investment envelope.”

Capital expenditures for 2024 are expected to be between $35 billion and $40 billion, up from a previous prediction of $30 billion to $37 billion, “as we continue to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap,” Meta stated.

Zuckerberg anticipates a “multiyear investment cycle” until Meta’s AI technologies develop into commercial services, but notes that the business has a “strong track record” in that regard.

Meta finance head Susan Li reiterated Zuckerberg’s comments, saying the business must create advanced algorithms and scale products before they can generate real income.

“While there is tremendous long-term potential, we’re just much earlier on the return curve,” he said.

Even before the call started, investors were reducing their positions. Meta offered a modest revenue forecast for the second quarter, which overshadowed the first-quarter beat.

As the stock market plunged, Zuckerberg assured investors that if they were ready to ride along, they could be rewarded.

“Historically, investing to build these new scaled experiences in our apps has been a very good long-term investment for us and for investors who stuck with us and the initial signs are quite positive here too,” Facebook CEO Mark Zuckerberg said. “But building a leading AI will also be a larger undertaking than the other experiences we’ve added to our apps and this is likely going to take several years.”



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