Meta loses $200 billion in value as Zuckerberg focuses earnings call on all the ways company bleeds cash

🌈 Abstract

The article discusses Meta's (Facebook's parent company) recent earnings call, where CEO Mark Zuckerberg focused on the company's long-term investments in AI and the metaverse, leading to a significant drop in the company's stock price.

🙋 Q&A

[01] Meta's Earnings Call and Stock Price

1. What were the key points Zuckerberg discussed during Meta's earnings call?

• Zuckerberg spent most of his opening remarks discussing Meta's investments in AI and the metaverse, including its new large language model Meta Llama 3 and the recent rollout of Meta AI.
• He also talked about potential opportunities for expansion within the mixed reality headset market, such as a headset for work or fitness.
• Zuckerberg acknowledged that Meta's Reality Labs unit, which houses the company's hardware and software for the metaverse, continues to bleed cash, with $3.85 billion in losses in the first quarter.

2. How did the market react to Zuckerberg's focus on long-term investments?

• Shares of Meta tumbled as much as 19% in extended trading on Wednesday, wiping out more than $200 billion in market cap.
• Zuckerberg acknowledged that Meta has historically seen a lot of volatility in its stock during this phase of investing in new products before monetizing them.

3. What was Meta's financial performance for the first quarter?

• Meta reported better-than-expected profit and revenue for the first quarter, despite the stock price drop.
• However, Meta issued a light revenue forecast for the second quarter, overshadowing the first-quarter beat and leading investors to trim their holdings.

[02] Meta's Cost-Cutting and Future Investments

1. What cost-cutting measures has Meta implemented?

• Zuckerberg put in place a cost-cutting plan early last year, slashing headcount and eliminating unnecessary projects to become a "stronger and more nimble organization."

2. How does Meta plan to fund its future investments?

• Zuckerberg said that while Meta will continue to operate efficiently, shifting existing resources to investments in AI will "grow our investment envelope meaningfully."
• Capital expenditures for 2024 are anticipated to be in the $35 billion to $40 billion range, an increase from a prior forecast, as Meta accelerates its infrastructure investments to support its AI roadmap.

3. What is Zuckerberg's outlook on the timeline for Meta's AI investments to become profitable?

• Zuckerberg expects a "multiyear investment cycle" before Meta's AI products will scale into profitable services, but he noted that the company has a "strong track record" in that department.
• Meta's finance chief, Susan Li, echoed this sentiment, saying the company needs to develop advanced models and scale products before they will drive meaningful revenue, and that they are "much earlier on the return curve."