More than $65 Billion has been wiped off the market value of Meta, after it reported profits halved during the third quarter of the year as advertisers reined in spending amid the global economic downturn.
The 19% tumble in Meta’s share price during after hours trading knocked an estimated $10 Billion off the personal wealth of Mark Zuckerberg.
Zuckerberg, Meta’s largest shareholder, has seen his net worth plummet by $77 Billion so far this year because most of his fortune is in the company’s shares. He was worth just over $125 Billion at the start of 2022, according to Bloomberg data, but after Meta’s most recent share slide is now worth $49 Billion.
Meta, which also owns WhatsApp, reported $27.7 Billion in revenue for the third quarter higher than analysts forecasts as sales shrank by 4% compared with the same period a year earlier. The company reported $4.4 Billion profit for the same period, 52% lower than the $9.2 Billion it made a year earlier.
It came as the company, which has poured investment into its virtual reality project, Amid growing competition from TikTok, Meta is also suffering as companies cut back on advertising spending.
Meta’s results were the latest in a series of disappointing earnings reports. The company has invested heavily in new products that have so far failed to bear fruit. It lost $230 Billion in market value in February in the biggest one day loss in history for a US company, after its shares slumped by 26%.
Meta’s costs and expenses climbed by 19% in the third quarter compared with a year earlier, as a result of spending on the metaverse and in its short form video content product Reels.
Reality Labs, its metaverse division, made a $3.7 Billion loss over the past three months, while the company said it anticipated these losses would “grow significantly year over year” in 2023.
Faced with concern from investors about the losses, Zuckerberg said he was confident that spending on the metaverse and other “experimental bets” would begin to pay off.
“Over time, these are going to end up being very important investments for the future of our business,”
“This is some of the most historic work we’re doing. People are going to look back on [this] decades from now and talk about the importance of the work that was done here.”
“While we face near-term challenges on revenue, the fundamentals are there for a return to stronger revenue growth.”
Zuckerberg said.
Meta and other tech companies have been hit by fears of recession and rising inflation. Google and Microsoft have also disappointed investors with third quarter results.
In addition, Meta has struggled with changes to Apple privacy policies enacted in 2021 that undercut its primary advertising model which the company predicted would cause it to lose out on a projected $10 Billion in advertising revenue in 2022.
“Meta is on shaky legs when it comes to the current state of its business,”
“To return to stronger growth, Meta needs to turn its business around. It would benefit from less priority on the metaverse and more on fixing its core business.”
said Debra Aho Williamson, an analyst with Insider Intelligence.
