April 19, 2024
Meta spent billions closing offices and laying off people. Now we know why.

Remember when investors were worried that Mark Zuckerberg was spending money on the metaverse and virtual reality?

Well, it’s still happening: Last year, Meta lost $16.1 billion on its “Reality Labs” division, the group that brings you things like Oculus goggles. This exceeds the deficit of $13.7 billion in 2022.

Those losses are also accelerating: In the last quarter of 2023, Meta lost $4.6 billion on the Metaverse.

There’s still more to come, with Zuckerberg promising investors: “For Reality Labs, we expect our ongoing product development efforts in augmented reality/virtual reality to further our ecosystem.” “Operating losses will increase significantly year-on-year due to investment.” Meta said in its recent earnings release.

But this time, investors seem to be completely cool with Zuckerberg’s metaverse investment. Meta’s stock, which was already at an all-time high, rose nearly 12% on the news.

What did you give?

Here’s an easy answer: For starters, Meta says it will continue to buy back its stock — which Wall Street always loves — and, for the first time in its history, it plans to start rewarding shareholders with dividends. going.

But the bigger picture is that Meta has spent the last few years pushing people out the door, getting out of leases, etc. and it has improved the company’s bottom line – while Meta is bleeding red ink on the future. .

Last year, Meta spent $3.5 billion downsizing itself. Of this, $2.5 billion came from “facilities consolidation” – closing and combining offices – and another $1 billion came from “severance and other personnel costs” – that is, laying people off. The company now operates with 67,300 employees, a 22% decline from last year.

And that means Meta’s profit margin is much better: while its revenue grew by 16% (most Big Tech companies would be very happy these days), its operating income increased by 62%, and its profits increased by 62%. increased to 69%.

And while Zuckerberg and other Big Tech leaders have said they’re making cuts to make their companies more efficient and more dynamic, these end results matter a lot: They want to show Wall Street they can still make profits. Can raise – even if their growth days are past, and even if they are still investing money in new things.

Source: www.businessinsider.com

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