Since October, Facebook has rebranded the company, articulated a vision for the internet where people can digitally connect through virtual reality avatars or teleport to see places like ancient Rome, and helped spark the craze for investments in the metaverse.
When the company, now Meta Platforms, releases its fourth quarter results this week, investors will have a new window into the financial impact of CEO Mark Zuckerberg’s ongoing passion.
Meta plans to show results for the first time from its augmented and virtual reality hardware unit, Reality Labs, an investment the company previously warned would result in a profit of US$10 billion (AU$14 billion). for 2021 and would not be profitable “anytime in the near future”.
The company is hiring engineers and buying up several VR game studios to head into the Metaverse, which is a broad futuristic idea of shared virtual realms accessible through different devices that Zuckerberg bets will be the successor to the mobile internet .
Analysts said they’d like to see indicators on the Reality Labs division’s profitability, how long it might be a drag on the advertising side, and evidence of VR headset sales strength.
“That’s going to be huge for me as an analyst, not having to surgically dig into Facebook’s earnings…and just see a lens in Reality Labs,” said Stephanie Llamas, VoxPop’s VR market analyst.
Meta said it expects non-advertising revenue to decline year-over-year in the fourth quarter as it compares unfavorably to the “strong launch” of its Quest 2 VR headsets during the season. celebrations of the previous year.
The company hasn’t released sales figures for the Quest helmets, but a July recall notice for the Quest 2’s face foam liners said it affected about 4 million units in the United States.
In a sign of strong headphone sales over the recent holiday season, its Oculus app hit the top spot on the US App Store for free iPhone apps on Christmas Day.
However, investors will have in mind how Meta’s core digital advertising business is doing, after the tech giant said in October that it faced “significant uncertainty” in the fourth quarter.
The company, which owns the world’s second-largest digital advertising platform after Alphabet Inc’s Google, has warned it could face continued blows from Apple Inc’s privacy changes that have made it harder for brands to target and measure their ads on Meta social media services Facebook and Instagram.
Analysts said Meta had set the bar low for its future earnings, but questions remained about those effects and issues related to the COVID-19 pandemic.
“Apple’s tracking change clearly had a negative impact on Facebook in the September quarter,” said Evercore ISI analyst Mark Mahaney.
“The question is, were they able to mitigate that risk further…or did it become more significant?”
Pedro Palandrani, research analyst at Global X, said the Metaverse is “the long-term story,” but in the short term investors would be looking for how Meta navigates Apple’s politics as well as updates. of e-commerce and ways to monetize messaging or features such as its short video offering, Reels.
Meta, which reported revenue of around $86 billion in 2020, has yet to detail how it will make money in the Metaverse.
In November, he highlighted potential opportunities for brands, from immersive stores to hosting paid mixed reality events.
The company has invited a group of advertising executives to discuss its rebranding and plans for the Metaverse in a virtual roundtable next month.
Meta is expected to post revenue of $33.38 billion, according to Wall Street estimates, up 18.9% year-over-year, and is expected to post quarterly earnings per share of $3.84, a slight drop.
The company said it expects total 2021 spending to be $70-71 billion and full-year 2022 spending to be $91-97 billion.