Reality Labs Will Spend Billions Even though Meta Has Made the Largest Cuts in Meta’s History
If you are a tech investor hoping that Meta Platforms will find religion in cost-cutting as it relates to heavy spending on virtual realities, this is not the right time to place your bets. The company is cutting costs including mass layoffs. Much of the market’s attention has been on Mark Zuckerberg’s billions of dollars that he is investing in Reality Labs and his vision for a future internet and social networks transformed by the metaverse concept. Reality Labs is losing more than $10 billion annually, according to a top executive of Meta VR. However, this week, CNBC reported that spending will continue.
Big Tech should reduce spending in a difficult stock market and slowing economy. Investors want this to happen. Alphabet faces pressure to reduce costs. Amazon is laying off many corporate divisions where the risky bets have not paid off. shares are down by 65% this year. Altimeter Capital sent an October letter to its leaders, in which it stated that Mark Zuckerberg’s company had “drifted towards the land of excess.”
“Last week has been really difficult,” Ash Jhaveri (vice president of Reality Labs partnerships) said about the layoffs in an interview with Steve Kovach, CNBC’s executive council summit in New York. He said that the investments made in the core business and future business are the right ones.
He stated that spending levels are a direct result of the amount of change being pursued by the company.
Jhaveri stated that he spends approximately one to two hours per week participating in virtual reality team meetings.
He said, “It’s about the next version internet, what technology can do to connect us, make us feel more present than what we can currently do. With an app or website, you can only get so close.” “That’s why it’s so important to us.”
The top Meta VR executive reiterated the position Zuckerberg had set out on his last earnings call. Reality Labs had lost $9.4 billion in the previous year. The CEO stated that operating losses would increase significantly in 2023.
Some investors doubt that Meta will continue to promote this message. Zuckerberg stated that it could take a decade before the concept becomes mainstream, but he anticipates that spending will increase in the years ahead.
“He’s got to say that he is so committed to this… This can take ten years… This can be so many trillions of dollars. On CNBC’s Fast Money Halftime Report, Karen Firestone, CEO, of Aureus Asset Management said that elastic eventually snaps.
She cited the Meta layoffs, and the recent shedding of real estate after years of growth as evidence that Reality Labs may still experience spending restraint. This is something the company won’t admit to.