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Meta faces headwinds from legal battles as well as optimistic product lineup outlooks

Meta Platforms posted its fourth quarter (Q4) earnings results on Tuesday, revealing a milestone of two billion daily active users.

According to the metaverse firm’s figures, it received 2.96 monthly active users (MAUs), or a 2 percent increase year-on-year.

It also reported a 23 percent spike in ad impressions across its app portfolio – Facebook, Instagram, WhatsApp, and Messenger. Average prices per ad dropped 22 percent YoY but a jump of 18 percent YoY for 2022.

Revenues for Q4 and 2022 totaled $32.17 billion and $116.61 billion, respectively. Revenues would have reached a further $2.01 billion and $5.96 billion for the respective quarter and year, or a 2 percent and 4 percent gain.

Costs and expenses reached $25.77 billion and $87.66 billion, respectively, or 22 percent and 23 percent YoY for Q4 and the year.

Costs included in expenses included Meta’s restructuring process, totaling $4.20 billion for Meta’s Q4 reports.

The Menlo Park-based enterprise also launched a share buyback initiative, repurchasing $6.91 billion in Class A stocks for Q4 and $27.93 billion for 2022.

Meta currently has 86,482 employees across its workforce as of the end of 2022. This increase of 20 percent YoY included a “substantial majority” of those that faced layoffs announced in November.

Most of the 11,000 former employees would not register in Meta’s Q1 2023 reports, lowering the total number of employees to over 75,000.

Restructuring Efforts amid Q4 Results

Speaking further, Mark Zuckerberg, Meta’s Chief Executive and Founder, added that Meta’s progress on its AI discovery engine and Reels were major drivers for stronger user engagement.

He continued: [Our] management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”

According to the tech giant, it launched several measures in Q4 to streamline operations and “realign our business and strategic priorities.”

Measures taken in the initiative included consolidation strategies for its real estate to “sublease, early terminate, or abandon” some offices under a lease. The company also restructured with its recent 11,000 layoffs across its family of apps and Reality Labs divisions.

It will also move to build its “next-generation data center design.” It is not indicated in the reports whether the data centre is the Research Supercluster (RSC) as outlined in previous reports.

Speaking further on restructuring charges, Meta stated,

“The impact of the severance and other personnel costs recorded in the fourth quarter of 2022 was not material after offsetting with the savings from the decreases in payroll, bonus and other benefits expenses”

Concluding, Meta Platforms stated it would continue monitoring developments on transatlantic data transfers “and their potential impact on our European operations.”

Meta’s Q4 Stock Gains, Reality Labs Losses

Additional reports found that Meta’s shares skyrocketed 23.49 percent over the last five days due to its Q4 results. The spike in stock prices comes after Meta announced its $40 billion stock repurchase.

Conversely, the company reported a 4 percent drop in revenues YoY. Shares have also nosedived 60 percent from last year due to the company’s ongoing plans to build the Metaverse.

Meta’s Reality Labs division also lost an additional $4.28 billion USD in Q4, raising its total losses to $13.72 billion, reports show.

Analysis of Meta’s Ongoing Operations

Demond Cureton, Senior Journalist for XR Today, commented on the latest updates on Meta Platform’s operations and prospects.

Amid the release of Meta’s Q4 reports, it faces both significant regulatory challenges and key product milestones, leading to mixed results, the firm has reached several key milestones.

Meta launched its Quest Pro mixed reality (MR) headset in October last year, leading to successes in its enterprise-focused sales. Furthermore, the company aims to release its Meta Quest 3 headset as a successor to its critically-acclaimed Quest 2 headset unveiled in October 2020.

Conversely, Meta has also shelved development on its Project Nazare smart glasses to develop key hardware needed for enterprise markets. This reflects actions taken at Google, Snap, Microsoft, and Apple over the last few months regarding their respective smart glass offerings.

Additionally, the overhead costs due to restructuring, penalties, ad revenue losses, and research and development (R&D) continue to plague the company amid its shift to the Metaverse.

It also aims to focus on its core family of apps while reducing overhead costs with the recent wave of layoffs to remain competitive. Meta’s latest shift with the Quest Pro aims to reclaim its market share in the enterprise space by rapidly building fresh use cases for MR technologies.

Despite its ambitious consumer-based metaverse plans unveiled in 2021, Meta’s Connect 2022 last October reflects its priority shift and focus on fresh emerging technologies. Meta’s Quest lineup continues to note successes in its gaming and application revenues, according to recent reports.

Such innovations include its partnerships with Microsoft and Zoom, digital twin and hyperrealistic avatar construction tools, and AI-powered Research SuperCluster facility, among others.

As Meta moves into 2023, it will have to balance between a secure and solid-performing family of apps and conservative approaches to R&D. Another income stream is building relationships between ecosystem developers and its current and future headset devices. This will expand its family lineup gradually while building use cases for its current innovations.

Meta Headwinds in US, EU Regulatory Community

Following its Q4 results, Meta must also tread carefully in the regulatory department due to increased scrutiny over its technologies. This comes amid the UK government’s approval of its Online Safety Bill after the death of a young woman using Facebook’s social media platforms.

Due to the incident, Meta has revised its policies to accommodate regulators with increased engagement. In addition to investing in the ethical development of the Metaverse, Meta will use its AI-backed toolkit and future RSC facility to regulate activities on its social media platforms.

Deepened cooperation with transnational organisations such as the XR Association (XRA) and Metaverse Standards Forum will remain crucial to its operations.

One of its biggest challenges, however, will come from US regulators in the Federal Trade Commission (FTC). Numerous tech firms continue to face headwinds from global regulators, including Microsoft, Apple, Tencent, and many others.

This comes amid a major injunction on its potential buyout of virtual reality (VR) firm Within Unlimited.

Regulators have said that Meta aims to create a “campaign to conquer VR” after buying headset maker Oculus in 2014. Courts requested a block on the acquisition until after judges issued the ruling.

Furthermore, Meta remains wary of its interactions with the European Union, namely after recently facing a regulatory row with European regulators over its transnational data transfers.

United States and European regulators resolved the matter last year, improving relations and prospects for Meta’s future prospects across Europe.

These were noted in Meta’s Q4 reports as they remain a core income stream for its operations. Failure to sustain these data flows could result in further blows to its profitability, leading to compounded issues.