Meta Platform’s has not sugar-coated the scale of the challenges it faces, but Wall Street seems to have lost patience and Meta’s share price plummeted overnight.

Indeed, after Meta announced third quarter financial results, investors rushed to dump Meta stock in after hours trading, with Meta’s share price dropping an alarming 20.3 percent to $129.82.

This is a loss of roughly $67 billion off Meta’s stock market value, and adds to the more than half a trillion dollars in value already lost this year. Indeed, before this overnight drop, Meta’s share price had already fallen over 61 percent in 2022.

Financial performance

A further sign of investor unrest came earlier this week when a prominent investor in an open letter bluntly urged CEO Mark Zuckerberg to stop spending so much money on the ‘metaverse’ and urged him to slash Meta’s workforce by 20 percent.

Meta had said in July 2021 that it intended to spend $10 billion a year for the next decade developing the metaverse, which it sees as the next step for the internet, making it more immersive.

Last month Meta announced its new high-end VR headset, called the Quest Pro.

This arrived despite concern that VR or its metaverse apps (i.e. Horizon Worlds) is not catching on with consumers.

Image credit: Meta

On Wednesday evening, Meta released its third quarter resulting ending 30 September.

And it made for grim reading, despite the firm remaining profitable.

Meta posted a 52 percent drop in Q3 profits down to $4.4bn from $9.1bn in the same year-ago quarter.

Meanwhile Q3 revenues fell 4 percent to $27.7bn, from $29bn a year earlier.

This is the second straight quarter that revenues have declined at Meta, and highlights the troubles for Meta as it contends with slowing global economic growth; competition from TikTok; privacy changes from Apple that have impacted advertising revenues; and concerns about massive spending on the metaverse.

Zuckerberg admitted Meta faced some short term challenges.

“Our community continues to grow and I’m pleased with the strong engagement we’re seeing driven by progress on our discovery engine and products like Reels,” said Zuckerberg. “While we face near-term challenges on revenue, the fundamentals are there for a return to stronger revenue growth.”

The Meta Store in Burlingame. Image credit: Meta

“We’re approaching 2023 with a focus on prioritization and efficiency that will help us navigate the current environment and emerge an even stronger company,” he said.

Hiring freeze

Executives announced plans to consolidate offices and said Meta would keep headcount flat through the end of 2023 via a hiring freeze.

In late June Meta was already bracing for a serious economic downturn and had slashed its hiring plans.

Zuckerberg told staff at the time that Meta has cut plans to hire engineers by at least 30 percent this year, as he warned them to brace for a deep economic downturn.

Digging down into Meta’s results, the firm said that Facebook daily active users (DAUs) were 1.98 billion on average for September 2022, an increase of 3 percent year-over-year.

Facebook monthly active users (MAUs) were 2.96 billion as of September 30, 2022, an increase of 2 percent year-over-year.

Total costs and expenses meanwhile were $22.05 billion, an increase of 19 percent year-over-year.

This includes an impairment loss of $413 million for certain operating leases as it reorganises its office facilities with its anticipated operating requirements.

Headcount at Meta was 87,314 as of September 30, 2022, an increase of 28 percent year-over-year.

Looking forward

Meta then all but guaranteed investor concern when it warned that its overall expenses could rise as much as 16 percent next year.

It also said that it anticipates that operating losses at Reality Labs – the unit responsible for bringing the metaverse to life – “will grow significantly” next year, Reuters reported.

Meta forecast that its full-year 2023 total expenses would be $96 billion to $101 billion, significantly higher than a revised estimate for 2022 total expenses of $85 billion to $87 billion.

Meta also estimated that its fourth-quarter revenue would be in the range of $30 billion to $32.5 billion, under analysts’ estimates of $32.2 billion, according to Refinitiv data.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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