Mark Zuckerberg started Meta's earnings call by talking about artificial intelligence. He then moved to the Metaverse to promote his company's headsets, glasses, and operating system. He spent almost his entire opening remarks focusing on the various ways in which the meta suffers losses.
Investors weren't keen on that. Meta stock fell as much as 19% in extended trading Wednesday, wiping out more than $200 billion in market capitalization. The decline came even though Meta reported better-than-expected profits and revenue in the first quarter.
Zuckerberg appeared ready to sell.
“I think it's worth pointing out that historically at this stage of our product strategy, we're investing in new product expansions that we haven't yet monetized, so we're seeing stock price volatility,” Zuckerberg said. has been seen in a big way,” he said. . He cited past initiatives such as short video services Reels and Stories and moving to mobile.
Meta Inc. CEO Mark Zuckerberg testifies before the Senate Judiciary Committee at the Dirksen Senate Building in Washington, DC, on January 31, 2024.
Alex Wong | Getty Images
Meta derives 98% of its revenue from digital advertising. But as much as Zuckerberg talked about advertising, he was looking to the future and how the company could turn current investments into advertising dollars. When discussing Mehta's efforts to build “cutting-edge AI,” he said, “Building a large business here will require several steps, including expanding business messaging and bringing advertising and paid content into AI interactions.” There is a way to do that.”
He spent some time talking about the company's latest large-scale language model, Meta Llama 3, and recent developments in Meta AI, the company's answer to OpenAI's ChatGPT.
Zuckerberg then looked at potential opportunities for expansion within the mixed reality headset market, including headsets for work and fitness. Meta on Monday opened up access to the operating system inside its Quest headset, which Zuckerberg said will accelerate the growth of the mixed reality ecosystem.
He also mentioned Meta's AR glasses, calling them “an ideal device for an AI assistant because they can see what you see and hear what you hear.”
Ray-Ban Meta Headliner Smart Glasses.
Jake Piazza | CNBC
Meanwhile, Meta's Reality Labs division, which houses the company's hardware and software for early Metaverse development, continues to drain money. Reality Labs reported first-quarter sales of his $440 million and a loss of $3.85 billion. The sector's cumulative losses since the end of 2020 exceeded $45 billion.
Zuckerberg bought himself some time.
Meta's stock price has nearly tripled in the last year and is up 40% in 2024 as of Wednesday's close, reaching a record high of $527.34 in early April.
After a tough 2022 that saw the company lose about two-thirds of its value, Zuckerberg appears to have regained Wall Street's trust.
The rally was driven by CEO Mehta's cost-cutting plans, which he told investors early last year that 2023 would be the “year of efficiency.” The company has reduced headcount and eliminated unnecessary projects in an effort to become a “stronger, more agile organization.”
Zuckerberg said Wednesday that Meta will continue to operate efficiently, but that moving existing resources to invest in AI will “significantly expand our investment horizon.”
Capital spending in 2024 is expected to be in the range of $35 billion to $40 billion, with an advance forecast of 300 billion “as we continue to accelerate infrastructure spending to support our artificial intelligence (AI) roadmap.” It is expected to increase from $37 billion to $37 billion, Mehta said. He said.
Zuckerberg said he expects Meta's AI products to require a “multi-year investment cycle” to scale up to profitable services, but that the company has a “strong track record” in the sector. ”.
Susan Lee, head of Meta Finance, echoed Zuckerberg's comments, saying the company needs to develop advanced models and scale its products before generating meaningful revenue.
“The long-term potential is huge, but we're only very early in the revenue curve,” Lee said.
Investors were cutting back on their holdings even before the calls started. This is because Meta announced lower sales forecasts for the second quarter, obscuring the strong performance of the first quarter.
As stocks intensify, Mr. Zuckerberg told investors they could be rewarded if they were willing to ride along.
“Historically, investing in building these new scale experiences in our apps has been extremely rewarding in the long run for both us and the investors who support us,” Zuckerberg said. “It's been a good investment. Again, the early signs are very positive.” “But building cutting-edge AI is a larger undertaking than any other experience we add to the app, so it will likely take several years.”
