Meta lost an incomprehensible $16 billion on its Reality Labs projects last year, yet the company’s stock price continues to climb.
After significantly reducing their workforce in 2023 at a cost of over $1 billion, many were left wondering what Meta was up to. Yet, Wall Street quickly realized the social technology company had a plan to ensure profits continued to pour in.
Astonishing Loses For Meta
In 2023 alone, Meta’s “Reality Labs” lost the company over $16 billion, which is a slight increase from the $13.7 billion lost in the previous year.
Reality Labs is the wing of the company behind projects like Oculus goggles.
Zuckerburg Tries to Ease Investors’ Minds
The losses didn’t stop there. Meta also experienced a loss of just over $4.5 billion in the last quarter of 2023 from the Metaverse department, and Zuckerberg explains this will continue.
There’s more to come, Zuckerberg is promising investors. “For Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and our investments to further scale our ecosystem,” Meta said.
Meta Spends Billions to Close Offices
A hot talking point of 2023 was the extensive layoffs that were seen throughout Meta, including their Metaverse department.
According to reports, Meta spent an astonishing $3.5 billion just to reduce the total size of the company.
Over a Billion Spent on Severance Packages
Most of the spending can be attributed to the closing and combining of offices, which cost the company close to $2.5 billion.
A further $1 billion was spent on “severance and other personnel costs,” meaning thousands of workers were fired.
Shrinking Workforce
With the severance packages came a substantial drop in Meta’s total workforce.
According to figures, the company now has around 67,300 employees, which is 22% less than in 2023.
Meta Has Spent Years Pushing Employees Out
After forcing out an extensive number of employees, many have been left wondering why Meta has decided to ax so many jobs in the first place.
Yet, it soon became apparent the sacrifice of a few billion in the short term would drastically increase the company’s overall profitability during the next few years.
Profitability Margins Greatly Increase
Wall Street experts were quick to point out that in the wake of the extensive downsizing, Meta significantly increased their profit margins.
While the company’s revenues will only increase by just over 15%, it can expect its profitability to increase by nearly 70%.
Meta Aims to Show Wall Street They Still Have It
Zuckerberg and other Meta executives claim the cuts align with their plan to make the company more dynamic and run more efficiently.
Yet, economists, on the other hand, seem to think it is a message to shareholders, one that aims to suggest the company still has what it takes to increase profits.
Meta Stock Continues to Rise
Zuckerberg spoke to the investors directly, stating that Meta will continue to invest money in the Reality Labs department, which appears to be hemorrhaging cash.
Yet, not long after the news broke, Meta’s stock rose an impressive 12%, bearing witness to the shareholders’ faith in Zuckerberg’s words.
Whales Happy with Meta’s Recent News
While it seems unusual to witness investors driving up the price of Meta even with the enormous losses reported in the Reality Labs department, there is a reason behind it.
First and foremost, Meta will continue buying back its own stock, a trend that always sits well with the Wall Street Whales.
Rewards Coming for Loyal Investors
Another aspect of Meta’s future plans that caught the attention of long-term investors is a new change they’ll be implementing.
For the first time in Meta’s history, they will begin to issue dividends to all shareholders. It would appear the reduction in employees, coupled together with the announcement of the dividend, was planned to ensure Meta’s shareholders didn’t lose faith in the company’s future.
