Mark Zuckerberg commenced Meta’s earnings call with a discussion on artificial intelligence, swiftly transitioning to the metaverse, highlighting Meta’s headsets, glasses, and operating system. Interestingly, he dedicated much of his opening remarks to elucidating the various facets of Meta’s financial losses.
However, investors seemed unimpressed. Meta’s shares plummeted by as much as 19% in extended trading on Wednesday, erasing over $200 billion in market capitalization. This decline occurred despite Meta reporting profits and revenue for the first quarter that surpassed expectations.
Anticipating the sell-off, Zuckerberg remarked, “I think it’s worth calling out that we’ve historically seen a lot of volatility in our stock during this phase of our product playbook where we’re investing in scaling a new product but aren’t yet monetizing it.” He referenced past endeavors such as Reels, Stories, and the transition to mobile.
While Meta currently derives 98% of its revenue from digital advertising, Zuckerberg looked ahead, discussing potential avenues to convert current investments into advertising revenue. He explored options like scaling business messaging and introducing ads or paid content into AI interactions as part of Meta’s effort to build a “leading AI.”
Zuckerberg also highlighted Meta Llama 3, the company’s latest large language model, and Meta AI, its response to OpenAI’s ChatGPT. Furthermore, he outlined opportunities for expansion within the mixed-reality headset market, such as developing headsets for work or fitness.
Despite Meta’s hardware and software unit, Reality Labs, reporting sales of $440 million for the first quarter, it continues to incur significant losses, amounting to $3.85 billion. However, Zuckerberg’s cost-cutting initiatives implemented last year have buoyed Meta’s stock, which nearly tripled in 2023 and was up 40% in 2024 as of Wednesday’s close.3
Looking ahead, Meta plans to continue operating efficiently while reallocating resources to AI investments. Capital expenditures for 2024 are expected to be in the range of $35 billion to $40 billion, reflecting an increase to support the company’s AI roadmap.
Zuckerberg acknowledged that it will likely take several years before Meta’s AI products become profitable services but expressed confidence in Meta’s track record in this regard. Meta’s finance chief, Susan Li, echoed this sentiment, emphasizing the need to develop advanced models and scale products before driving meaningful revenue.
Despite a light revenue forecast for the second quarter, Zuckerberg urged investors to consider the long-term potential, assuring them that investing in scaled experiences has historically been fruitful. He concluded by acknowledging the substantial undertaking of building a leading AI and emphasized the multiyear investment cycle ahead.
