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Facebook faces a decline in profit after its shift to Metaverse

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As it ramps up expenditure to execute Chief Executive Mark Zuckerberg’s late-year metaverse pivot, Facebook parent Meta Platforms Inc. is projected to announce increased sales but a minor fall in profit.

Facebook’s parent company, Meta, announced that its Reality Labs division lost $3.3 billion in the previous quarter. Reality Labs is the section in charge of designing and manufacturing the virtual reality gadgets utilized in the metaverse, such as the Quest 2.

In its first quarterly financial report since changing its name in October, Meta will also break out its Reality Labs division, which will provide investors with insight into the health of the metaverse’s virtual and augmented reality consumer business unit.

Mr. Zuckerberg’s audacious strategic pivot was to bank the company’s future on VR headsets, AR glasses, and virtual worlds known as the metaverse, in which users may live and work.

“This fully realised vision is still a long way off,” Zuckerberg explained. “And, while the way ahead is apparent, it is not fully defined.”

The corporation earned $10.3 billion in the third quarter, decreasing the same period the previous year. It acknowledged challenges to its growth, such as competition for short-form videos.

Although this will be the first time Meta separates its Reality Labs sector, the firm expects the business unit to generate relatively minimal income. While Reality Labs reflects the company’s future ambition, the Facebook and Instagram advertising businesses continue to be the foundation of Meta’s income sources.

According to FactSet analysts polled, advertising is predicted to account for about 98 percent of the company’s revenue in the third quarter. Analysts expect Meta’s advertising income to increase to $32.6 billion in the fourth quarter of 2021, up 19.9 percent from the previous year.

According to FactSet, the company’s fourth-quarter earnings are predicted to be $10.9 billion, a decrease of more than 2% from the previous year. Meta’s net income growth would have fallen for the first time since the second quarter of 2019.

“People have a lot of options for how they want to spend their time, and applications like TikTok are expanding extremely rapidly,” Zuckerberg explained, adding that the firm is investing in its own Reels app to compete.

“We’re revamping a lot of our ad infrastructure so we can keep growing and delivering high-quality tailored advertisements,” he explained.

On the call, the business also revealed that its ticker symbol would be changed to Meta in the first half of 2022.