With Cumulative Losses of $80 Billion, Meta Still Goes All-In on the Metaverse

Earnings Beat Expectations, Yet Stock Plunges Nearly 9%

On May 1 local time, as reported by Fortune, Meta released its Q1 2025 earnings report. The data showed that Meta posted net income of $26.8 billion (approximately 183.24 billion yuan) on revenue of $56.3 billion for the quarter, both exceeding Wall Street analyst expectations. Revenue grew 33% year-over-year, marking Meta's largest year-over-year increase in the past five years.

However, the impressive results failed to win over investors. Following the earnings release, Meta's stock price tumbled nearly 9% on Thursday. Market concerns centered on two key issues: a quarter-over-quarter decline of 20 million global users and the continued sharp rise in capital expenditure on AI infrastructure.

Notably, the $26.8 billion net income included a one-time $8 billion tax benefit. Excluding this factor, the actual operating profit performance would have been considerably less impressive.

User Losses Draw Scrutiny; Meta Points to Geopolitical Factors

In Q1, the global daily active users across Meta's family of apps — including Facebook, Instagram, and WhatsApp — declined by 20 million compared to the previous quarter, a figure that drew intense market attention.

Meta CFO Susan Li attributed the user decline to external factors beyond the company's control — internet disruptions in Iran and restrictions on WhatsApp access in Russia. She emphasized that total daily active users across Meta's apps still exceeded 3.5 billion, and that user numbers would have grown quarter-over-quarter if the impacts from Iran and Russia were excluded.

Nevertheless, for a social platform of this scale, the market remains skeptical about whether a fluctuation of 20 million users can be entirely explained by geopolitical factors.

The Metaverse 'Money Pit': Cumulative Losses Surpass $80 Billion

While Meta's core advertising business continues to surge, the company's massive investment in the metaverse remains the market's biggest point of contention. In Q1, Reality Labs — the division responsible for Meta Quest headsets, Ray-Ban smart glasses, and virtual reality platform development — continued to record billions of dollars in losses.

Since Meta officially announced its pivot to the metaverse in 2020, Reality Labs' cumulative operating losses have surpassed the $80 billion mark. This staggering figure means Meta has essentially been using profits from its advertising business to continuously bankroll a metaverse venture that has yet to find a clear path to profitability.

Despite ongoing external skepticism, CEO Mark Zuckerberg has repeatedly stated publicly that the metaverse and mixed reality represent the direction of the next-generation computing platform, and that Meta must position itself early to seize the advantage.

Soaring AI Capital Expenditure: A Two-Front War Tests Patience

Beyond the metaverse, Meta's investment in AI is also expanding rapidly. To support iterative training of its large language model Llama and AI infrastructure development, Meta's capital expenditure has continued to climb sharply. This means Meta is effectively fighting two costly wars simultaneously — AI and the metaverse — neither of which is likely to deliver direct returns commensurate with the investment in the near term.

For investors, these long-term investments are tolerable when advertising business growth is strong enough. But should the core business show any signs of slowing, the hefty spending on two fronts would become a significant drag on the stock price.

Outlook: Committed to the Long Game, but Market Patience Is Wearing Thin

Meta currently faces a paradoxical situation: its core advertising business remains robust, with revenue growth hitting a five-year high, yet the market is growing increasingly anxious about how the company spends its money. The $80 billion in metaverse losses, continuously rising AI expenditure, and short-term fluctuations in user growth together present a triple test of investor confidence.

From an industry perspective, against the backdrop of Apple Vision Pro's lukewarm market performance and an overall cooling of the metaverse concept, Meta's contrarian strategy of doubling down undoubtedly requires exceptional strategic resolve. Whether Zuckerberg's bet represents visionary foresight or resource misallocation may not become clear for another two to three years. What is certain, however, is that the window of time the market is willing to give Meta to prove itself is narrowing.