Since October, Facebook has renamed the company, articulated a vision of the internet where people can digitally connect via virtual reality avatars or teleport to see places like Ancient Rome, and helped spark the metaverse investment craze.
When the company, now Meta Platforms, releases fourth-quarter results on Wednesday, investors will have a new window into the financial impact of CEO Mark Zuckerberg’s current passion.
Meta plans to release the results of its augmented and virtual reality hardware unit, Reality Labs, for the first time, an investment that the company previously warned would have a $10 billion (approximately Rs. 74,680 crore) impact on profit. 2021 and not be profitable “at any time in the near future”.
The company is hiring engineers and buying several VR game studios to build the metaverse, which is a futuristic broad idea of shared virtual realms that can be accessed through different devices and which Zuckerberg is betting will be the successor to the internet. mobile.
Analysts said they would like to see indicators on the profitability of the Reality Labs division, how long it might be a drag on advertising and evidence on the strength of VR headset sales.
“It’s going to be huge for me as an analyst not to have to surgically dig into Facebook earnings… and just see a lens on Reality Labs,” said Stephanie Llamas, VR Market Analyst, VoxPop.
Meta said it expects non-ad revenue to decline year-over-year in the fourth quarter as it compares unfavorably with the “strong launch” of its Quest 2 VR headsets during the previous year’s holiday shopping season. .
The company did not release sales figures for the Quest headphones, but a July recall notice for the Quest 2’s foam face liners said it affected about 4 million units in the United States. In a sign of strong sales for the headphones over the recent holiday period, its Oculus app hit #1 on the US App Store for free iPhone apps on Christmas Day.
Investors’ main concern, however, will be how Meta’s core digital advertising business is faring, after the tech giant said in October that it faced “significant uncertainty” in the fourth quarter.
The company, which has the world’s second-largest digital ad platform after Alphabet’s Google, warned it could face continued impacts from Apple’s privacy changes, which make it difficult for brands to target and measure their ads on Apple’s social media services. Meta, Facebook and Instagram. Analysts said Meta had set a low level for its upcoming earnings, but there were still doubts about those effects and issues related to the COVID-19 pandemic.
“Apple’s tracking change clearly had a negative impact on Facebook in the September quarter,” said Mark Mahaney, analyst at Evercore ISI. “The question is, were they able to further mitigate this risk… or did it become bigger?”
Pedro Palandrani, research analyst at Global X, said the metaverse was the “long-term story,” but in the short-term investors would look to how Meta navigates Apple policy, as well as e-commerce updates and ways to monetize messages. or features like its short video offering, Reels.
Meta, which reported 2020 revenue of around $86 billion (approximately Rs. 6,42,330 crore), has yet to explain in detail how it will make money in the metaverse. In November, it pointed to potential opportunities for brands, from immersive stores to paid mixed reality events. The company invited a group of advertising executives to discuss its rebrand and its plans for the metaverse at a virtual roundtable next month.
Meta is expected to report revenue of US$33.38 billion (approximately Rs. 2,49,315 crore), according to Wall Street estimates, an increase of 18.9% year-on-year, and is expected to report quarterly earnings per share of US$ 3.84 (approximately Rs. 285). a slight decline. The company said that it expects total expenditure for 2021 to reach US$70 billion (approximately Rs. 5,22,830 crore) – US$71 billion (approximately Rs. 6,79,660 crore) – US$97 billion (approximately Rs. 7.24. 470 crore)
© Thomson Reuters 2022