Meta earnings are Subpar.
Facebook parent Meta said Wednesday that the augmented and virtual reality business at the heart of its metaverse ambitions generated $877 million in revenue, but disappointing fourth-quarter earnings underscored how much money the company relies on its social media business.
The details mark the first time the company disclosed the performance of its AR and VR unit, known as Reality Labs. The unprofitable unit, which lost $3.3 billion in the quarter, oversees the Oculus headset that will help anchor the company’s transition into the metaverse.
Last year, Facebook rebranded itself as Meta, a change that fueled hype around its online spaces where people would be able to work and socialize as digital avatars. Though, Meta remains reliant on digital advertising on the Facebook social network and its photo service, Instagram even as it barrels into the metaverse.
“While we expect Meta to ramp up testing ads and commerce within its metaverse offerings this year, those efforts will be highly experimental and not likely to drive much revenue in the near term,” said Debra Aho Williamson, a principal analyst at Insider Intelligence, which was formerly known as eMarketer.
In the fourth quarter, Meta posted revenue of $33.7 billion, above analyst expectations of $33.4 billion. However, it earned only $3.67 per share, falling short of the $3.84 per share projected by analysts by Thomson Reuters.
Meta’s stock plunged by more than 20% in the after-hours trading. The company’s stock ticker is expended to change META from FB in the first half of the year.
“I’m confident that leaning harder into these trends is the right short-term tradeoff to make to get long-term gains. We’ve made these types of transitions before with mobile feed and Stories,” Meta CEO Mark Zuckerberg said in a call with analysts on Wednesday.
Like other tech companies, Meta has warned that privacy changes imposed by Apple could make it harder for businesses to measure the effectiveness of their ads on Facebook and Instagram and other platforms. The company also said it was expecting “headwinds” caused by inflation and supply chain disruptions that affect advertiser budgets.
Meta’s efforts to build a digital realm has been bumpy. The company still faces criticism that it doesn’t do enough to combat misinformation, hate speech and other types of offensive or unwarranted content, problems that will only fester and grow more complex in the metaverse. The US Federal Trade Commission and multiple states, led by New York, are reportedly investigating potential anti-competitive practices by Oculus. This week, Meta shuttered its Diem cryptocurrency project after regulatory pushback.