Meta (formerly Facebook) recently released its Q3 2023 earnings report. Despite strong performance in its core business, the significant losses in its metaverse division have sparked investor concerns, causing the company's stock to fall more than 3% in after-hours trading.
This earnings report highlights the complex growth challenges faced by Meta. Data shows that by September 30, Meta's Q3 revenue reached $40.6 billion, a 19% increase year-over-year, exceeding the market expectation of $40.3 billion. However, the metaverse business, Reality Labs, became a drag on the company's performance, with losses amounting to $4.4 billion over the same period.
Image source: Picture generated by AI, authorized service provider Midjourney
Despite the substantial losses, Meta remains optimistic about the future, expecting Q4 revenue to reach between $45 and $48 billion, slightly higher than the market expectation of $46 billion. Notably, Meta's stock has risen 67% this year, making it one of the best-performing stocks in the S&P 500 index.
Meta CEO Mark Zuckerberg attributes the growth in performance to the application of AI technology. Meta is deploying AI in various fields, including developing chatbots supported by large language models, smart assistants for social applications, and AI-driven smart glasses. Although these projects are unlikely to be profitable in the short term, AI technology has already brought significant improvements in ad targeting and content recommendation.
Looking ahead, Meta plans to further increase its investment in AI, with capital expenditures expected to significantly rise by 2025. This strategy indicates that the company is seeking to transition from the metaverse to AI to find new growth engines. However, balancing long-term investments with short-term profitability pressures will be a significant challenge for Meta's management.
