- Meta’s profit margins have improved despite losses in its Metaverse division and a decrease in headcount.
- Investors are now supportive of Zuckerberg’s investments in the Metaverse, leading to a 12% increase in Meta’s stock.
- Downsizing efforts and cost-cutting measures have significantly improved Meta’s profitability, with operating income and profits increasing by 62% and 69% respectively.
Additional Coverage:
- Meta spent billions to close offices and lay people off. Now we know why. (businessinsider.com)
Mark Zuckerberg and his company Meta are seeing improved profit margins, in part due to a decrease in the company’s headcount. Despite losing $16 billion on the Metaverse last year, Meta’s stock saw a 12% increase on Wall Street. The company’s margins have significantly improved, even with the losses in the Metaverse division.
Investors were previously concerned about Zuckerberg’s spending on the Metaverse and virtual reality. Last year, Meta lost $16.1 billion in its “Reality Labs” division, up from $13.7 billion in 2022. The losses are accelerating, with a $4.6 billion loss in the last quarter of 2023. In its recent earnings release, Meta stated that it expects operating losses to increase in the Reality Labs division due to ongoing product development and ecosystem scaling efforts.
Despite these losses, investors are now supportive of Zuckerberg’s investments in the Metaverse. Meta’s stock, which was already at an all-time high, rose by 12% on the news. One reason for this is Meta’s commitment to buy back its stock, which is favored by Wall Street. Additionally, Meta has announced that it will start rewarding shareholders with a dividend for the first time.
A major factor contributing to Meta’s improved profitability is the company’s downsizing efforts over the past few years. This includes reducing the number of employees, terminating leases, and consolidation of offices. Last year, Meta spent $3.5 billion on shrinking itself, resulting in a 22% decrease in its workforce. These measures have significantly improved profit margins. While revenues increased by 16%, operating income increased by 62%, and profits increased by 69%.
The focus for Meta and other Big Tech companies is to demonstrate to Wall Street that they can increase profits, even while investing in new ventures and undergoing organizational changes. Cutting costs and improving efficiency are strategic moves to maintain profitability in a changing landscape.
Read More About This Story:
- Meta spent billions to close offices and lay people off. Now we know why. (businessinsider.com)