• Meta CEO Mark Zuckerberg unnerved investors on the company’s quarterly earnings call Wednesday by focusing on its long-term investments in AI and the metaverse.
  • Shares of Meta tumbled as much as 19% in extended trading Wednesday.
  • “While there is tremendous long-term potential, we’re just much earlier on the return curve,” Meta finance chief Susan Li said.

Meta shares tumbled as much as 19% in extended trading on Wednesday, wiping out more than $200 billion in market cap. The drop came despite Meta reporting better-than-expected profit and revenue for the first quarter.

Meta’s earnings call

Mark Zuckerberg started Meta’s earnings call by talking about artificial intelligence.

Digital advertising makes up 98% of Meta’s revenue. When Zuckerberg did speak about advertisements, though, it was mainly to discuss how the business might be able to convert its present investments into advertising dollars in the future.

He spoke extensively about the company’s newest large language model, Meta Llama 3, as well as the launch of Meta AI, which is the company’s response to OpenAI’s ChatGPT.

After that, Zuckerberg discussed possible avenues for growth in the mixed reality headset industry, such as a fitness or work headset. On Monday, Meta made the operating system that powers its Quest headsets publicly accessible. According to Zuckerberg, this will accelerate the growth of the mixed reality ecosystem.

The business that houses Meta’s hardware and software for the creation of the emerging metaverse, Reality Labs, is still losing money. For the first quarter, Reality Labs recorded sales of $440 million and losses of $3.85 billion. Since the end of 2020, the division has suffered losses totalling more than $45 billion.

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Meta’s long-term potential

Zuckerberg stated on Wednesday that while Meta will keep running smoothly, investing more of its current resources in artificial intelligence will “grow our investment envelope meaningfully.”

Compared to a previous estimate of $30 billion to $37 billion, capital expenditures for 2024 are expected to be between $35 billion and $40 billion, according to Meta. This increase is because “we continue to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap.”

Susan Li, the chief of Meta Finance, echoed Zuckerberg’s comments, stating that before products can generate significant revenue, the company must scale them and develop sophisticated models.

Li stated, “Even though the long-term potential is enormous, we’re just much earlier on the return curve.”