Facebook’s Shift to Metaverse Expected to Eat Into Profits

First American News LLC-Raleigh, NC: Facebook parent Meta Platforms are expected to post rising revenues but a modest decline in profit as it ramps up spending to execute the pivot to the metaverse as outlined late last year by Chief Executive Mark Zuckerberg.

In its first quarterly earnings since changing its name in October, Meta will also break out its Reality Labs segment, which will offer investors insight into the health of the virtual and augmented reality consumer business unit that is at the heart of the metaverse efforts.

The name change was part of a bold strategic shift from Mr. Zuckerberg to bet the company’s future on VR headsets, AR glasses and virtual worlds, known as the metaverse, in which users can live and work.

Although this will be the first time Meta breaks out its Reality Labs segment, the company is expected to report relatively small revenue for the business unit. While Reality Labs represents the company’s vision moving forward, the Facebook and Instagram advertising business remains the core part of Meta’s revenue streams.

For the quarter, advertising is expected to represent nearly 98% of the company’s revenue, according to analysts surveyed by FactSet. Analysts predict Meta’s advertising revenue will rise to $32.6 billion in the fourth quarter of 2021, up 19.9% compared with the year-earlier period.

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