Meta expects its metaverse-related costs to "increase meaningfully" for another year following its Q2 results.
gettyMeta handily beat Wall Street’s expectations for its Q2 results, but there was no joy in its metaverse division, which posted a wider-than-expected loss and warned investors to expect the situation to get worse before it gets better.
Increased expense will come from “ongoing product development efforts in augmented reality/virtual reality and investments to further scale our ecosystem,” according to a company statement, and CFO
Overall, the company reported quarterly revenue of $32 billion, up 11% from last year and beating Wall Street expectations of $31.1 billion, according to data compiled by Bloomberg. The increased sales helped boost earnings per share to $1.98, up 21% from 2022.
Shares were up over 6% in after-hours trading, hitting $317.
Meta’s Family of Apps division, which includes Instagram, Facebook and WhatsApp, drove revenue as ad impressions increased by 34%. The unit made $31.7 billion in revenue, beating analysts expectations of $30.5 billion, according to Bloomberg, and was up 12% year-over-year.
Reality Labs, the division that houses the company’s metaverse and virtual-reality operations, lost $3.73 billion in the quarter, slightly greater than the expected $3.68 billion, according to Bloomberg and wider than $2.8 billion a year earlier.
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“We remain fully committed to the metaverse vision,” Meta’s billionaire CEO Mark Zuckerberg said during the earning’s call, adding that it is focusing its efforts on combining artificial intelligence (AI) and the metaverse.
The metaverse team is currently focused on user retention, he added, and pointed to Meta’s integration with Roblox, a video game platform and metaverse competitor, as a sign of user growth. Roblox developers will be able to create virtual reality games through Meta’s Quest App Lab that will be available in Horizon Worlds.
Still some analysts are wary that the steadfast commitment to an immersive version of the internet may never pay off.
“Meta hasn’t seen any uptick in engagement for its Horizon Worlds app, either from content creators or early users, so it will likely focus on exploring ways to boost VR headset adoption,” Bloomberg Intelligence analysts Mandeep Singh and Nishant Chintala wrote in a Wednesday note.
Others, however, are slightly more hopeful about the investment’s payoff, particularly in its Quest virtual-reality headset offerings.
“Meta's focus on developing a strong footprint in metaverse will drive prospects over the long term. Oculus is the result of the company's ambitious mixed-reality efforts, which was built on a stack of Al technologies,” according to an early July analyst note by Zacks.
