Mark Zuckerberg’s recent Meta earnings call focused primarily on artificial intelligence and the metaverse, highlighting the company’s investments in new products. Despite reporting better-than-expected profit and revenue for the first quarter, Meta’s stock tumbled by as much as 19% in extended trading, leading to a significant loss in market capitalization. Zuckerberg acknowledged the volatility in Meta’s stock during phases of product investment and emphasized the company’s past struggles with monetization efforts like Reels and Stories.
The majority of Meta’s revenue comes from digital advertising, but Zuckerberg discussed potential future revenue streams, such as business messaging and integrating ads or paid content into AI interactions. He emphasized Meta’s efforts to build a leading AI, including the development of Meta Llama 3 and Meta AI. Additionally, he discussed opportunities for expansion in the mixed reality headset market, revealing Meta’s plans for a headset for work or fitness and the launch of the Quest operating system to support the mixed reality ecosystem.
Meta’s Reality Labs unit, responsible for hardware and software development for the metaverse, reported significant losses in the first quarter. Despite this, Meta’s stock price tripled in 2023, with a 40% increase in 2024, indicating a recovery in confidence from Wall Street. This rally has been driven by a cost-cutting plan implemented by Zuckerberg in 2023, with a focus on operational efficiency and investments in AI. Capital expenditures for 2024 are expected to increase to support Meta’s AI roadmap and drive meaningful revenue growth.
Zuckerberg and Meta’s finance chief, Susan Li, emphasized the long-term potential of the company’s AI products despite the need for a multiyear investment cycle before they become profitable. Li noted that Meta is still in the early stages of the return curve for these products and will need to develop advanced models and scale products to drive revenue. Despite issuing a light revenue forecast for the second quarter, Zuckerberg reassured investors that investing in new scaled experiences has historically been a good long-term strategy. He acknowledged that building a leading AI will take time but expressed confidence in Meta’s track record for scaling new offerings.
Investors seemed to trim their holdings in Meta before the call began, likely in response to the company’s light revenue forecast for the second quarter. Despite the stock plunge, Zuckerberg encouraged investors to remain patient and suggested that investing in Meta’s leading AI could be a rewarding long-term strategy. He emphasized the complexity of building a leading AI and predicted that it would take several years before these products become profitable. In the meantime, Meta will continue to focus on operational efficiency and investments in AI to drive future growth and revenue.
