Social media giant Meta has reported an increase in revenue for the first time in three quarters, beating expectations. However, the company also revealed that Reality Labs, its division dedicated to virtual reality and metaverse development, has lost almost $4 billion in the first quarter of the year.
CEO Mark Zuckerberg emphasized that the company is still committed to the metaverse vision despite Reality Labs’ operational losses and suggests that they will likely increase in the short term.
Meta’s Revenue Increases After Company Cuts 10,000 Jobs
Meta has seen an increase in revenue for the first time in three quarters. However, this positive update comes amid a restructuring that has already led to the elimination of over 10,000 jobs.
The tech giant reported first-quarter revenue of $28.10 billion, beating expectations of $27.66 billion and up 3% year-over-year. Despite the revenue beat, Meta’s net income company-wide was down 24% year-over-year, from $7.47 billion to $5.71 billion.
The decline in revenue was attributed to metaverse costs and a broader slump in advertising spending due to a weakening economy and a shift in consumer behavior. While its advertising impressions were up 26% year-over-year, ad prices were down 17% year-over-year.
Meta expects revenue to increase for the second quarter to between $29.5 billion and $32 billion. The top estimates by analysts were expecting sales of $29.5 billion, according to Refinitiv. Zuckerberg said in a statement:
“We had a good quarter and our community continues to grow. Our AI work is driving good results across our apps and business. We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision.”
Meta’s Metaverse Division Lost Approx. $4 Billion in Q1
Meta has been attempting to pivot away from social media to the metaverse in recent years. The company made headlines with its high-level metaverse entrance back in 2021. However, the road has been rocky, with the company losing billions.
Specifically, the metaverse department has lost nearly $4 billion this quarter and $13.7 billion in total last year, with expectations for increasing losses in 2023. Despite the losses, CEO Mark Zuckerberg emphasized that the company is still committed to this vision and artificial intelligence (AI) developments.
“A narrative has developed that we’re somehow moving away from focusing on the metaverse vision, so I just want to say upfront that that’s not accurate.”
Zuckerberg also claimed that VR and AR technology involve AI, which is relevant to both the metaverse and the development of AR glasses. “Our vision for AR glasses involves an AI-centric operating system that we think will be the basis for the next generation of computing,” Zuckerberg said on the call.
Meta’s flagship metaverse platform, Horizon Worlds, has fallen short of expectations, forcing the company to lower its target. The metaverse platform is reportedly plagued with bugs and problems, and there have also been user complaints about the quality of the virtual world.
Meta also revealed that half of the daily active users on its Quest headset spend over an hour per day on the device but did not disclose how many users use Quest headsets daily. “Building the metaverse is a long-term project, but the rationale for it remains the same, and we remain committed to it,” Zuckerberg said.
Meanwhile, Meta shares jumped 12% in extended trading on Wednesday after the company released its earnings report. The company’s shares are up more than 13% in pre-market trading.
This article originally appeared on The Tokenist
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