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Analysts predict decline in Meta profits as Zuckerberg pivots to AI

Analysts predict decline in Meta profits as Zuckerberg pivots to AI

The technology giant will reveal its quarterly results for the first time tomorrow.

Meta, which is run by Mark Zuckerberg, is expected to say tomorrow that its profits have gone down. This is because Facebook and Instagram’s parent company is increasingly looking to AI as a way to grow. The news comes during a change in the metaverse that has been hard to catch on.

Analysts who follow the company expect it to report a first-quarter profit of $5.2 billion, which is about 30% less than the $7.5 billion it made in the same time period last year. The company’s income is also expected to go down, but only by 1%, from $27.9 billion to $27.7 billion.

Profits expected to decrease amid shift to AI and metaverse

The temperature check from one of the largest social media companies coincides with earnings from other tech titans, including Google’s parent company Alphabet, Microsoft, and Amazon.

Zuckerberg designated 2023 Facebook’s “Year of Efficiency” after the company lost almost $14 billion on its Metaverse Division last year. Now, the company is tightening its purse in response to the challenging business climate in the United States.

The promise came after advertising, a key source of income for the company, dropped from $115 billion in 2021 to $114 billion last year. In a recent report, analysts at Argus Research said that the rise of TikTok puts pressure on Meta, but they also said that a possible ban in the U.S. or political pressure could give Meta some place to breathe.

“We believe that challenges at TikTok […] could benefit Meta, which continues to add users to its platform,” the report stated. “​​TikTok faces a potential ban in the U.S., or at least the sustained hostility of the U.S. government.”

Even though the company faces problems, it has kept adding to its already huge number of active users. In the last quarter of last year, the company stated that Facebook alone had 2.96 billion monthly active users. This is a 2% increase from the same time the year before.

Since the company’s rebranding in 2021, the metaverse drive has dominated the company’s reputation. In contrast to its so-called Family of Apps, which includes Facebook, Instagram, Messenger, and WhatsApp, Meta’s Reality Labs segment contributes a small amount to revenue.

In addition to the 11,000 employees laid off in November, Zuckerberg announced last month that the company would lay off an additional 10,000 workers.

“In retrospect, I underestimated the indirect costs of lower priority projects,” Zuckerberg said.

The company dropped its plans to offer NFTs on Instagram last month. A year after teasing that NFTs were going to the social media platform, the company changed its mind.

In the meantime, the company has released a series of AI-related products, following its Big Tech competitors in the wake of OpenAI’s ChatGPT’s phenomenal success. Meta’s products have included “Segment Anything,” an AI image identification tool, as well as advertising tools that utilize generative AI.

“Our leading work building the metaverse and shaping the next generation of computing platforms also remains central to defining the future of social connection,” he said.

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