Facebook-owner Meta recorded a loss of over $3.5bn in the third quarter of this year, as the company continues to burn cash on its new Metaverse-related initiative.
Overall, Meta saw its revenue fall 4% in the third quarter, while expenses rose by 19% year-over-year to $22.1bn. Compared to the previous year, operating income fell by 46% to $5.66bn, while overall net income was down 52% to $4.4bn for the quarter.
Even worse, revenue for Meta’s metaverse and virtual reality-focused division Reality Labs fell by almost 50% from the prior year to just $285m, with that division alone recording a loss of $3.67bn.
Other factors often cited as contributing to the significant slowdown for the company are a new privacy update of the iOS operating system for iPhones, a slowdown in spending on online advertisement, and competition from the likes of TikTok.
Commenting on the result, Meta founder and CEO Mark Zuckerberg admitted that the company faces “near-term challenges on revenue.” However, he also said the fundamentals are in place for a return to stronger revenue growth.
“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,” Zuckerberg said.
Meta’s financial situation was also commented on by chief financial officer David Wehner, who pointed specifically to Reality Labs as a major cost driver going forward.
[…] 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 the next generation of our consumer Quest headset later next year,” Wehner said.
The Meta CFO also warned of more losses on the horizon stemming from the company’s metaverse push:
“We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year.”
The results from the major social media company were not well received by the market, which sent Meta’s shares down by close to 20% in after-hours trading to $104.30 per share.
