At the tumultuous company’s late-Wednesday results conference, investors in Meta stock (NASDAQ:META) were hoping to hear one thing from founder Mark Zuckerberg: an admission that leaner spending times were coming because margins had been constrained by an unwise metaverse build-out and a weakening ad market.
On the contrary, they heard.
For the fiscal year 2023, the social media platform projected a cost increase of almost 13% year over year, far more than the Street’s prediction of 7%. Despite the likelihood of a U.S. recession in 2023, Meta will undoubtedly continue to invest heavily in Instagram, the metaverse, and VR gear.
While Meta typically lowers its operating expenditure guidance throughout the year (as they have done thus far this year), Deutsche Bank analyst Benjamin Black wrote in a note to clients that the elevated expense outlook is the wrong number at the wrong time for investors. “With a new CFO in place, some may argue the company is being overly conservative. Perhaps just as importantly, growing Reality Labs (RL) expenses appear to be one source of the elevated expense guide as RL is.
Thursday’s pre-market trade saw a more than 20% decline in Meta shares. On the Yahoo Finance platform, the ticker was shown above the “Top Trending” section.
The company’s forecast wasn’t particularly promising either. While Wall Street was anticipating $32.2 billion, Meta’s fourth-quarter revenue projections were between $30 billion and $32.5 billion.
The House of Zuck also declared that, although funding for Reality Lab will be gradually reduced after 2023, it will increase the next year noticeably.
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