Facebook parent company Meta has cautioned investors that it expects operating losses for its Reality Labs division to “increase meaningfully” in 2024.
The predicted rise in losses is attributed to the company's continuing investments in product development and the expansion of its artificial intelligence ecosystem.
Reality Labs, which includes augmented and virtual reality-related consumer hardware, software and content for the Metaverse, reported an operating loss of more than $4.4 billion in the second quarter that ended on June 30.
It expanded from $3.7 billion operating loss in the prior year period.
But industry experts are not worried about surging losses in the division, focusing instead on its potential long-term benefits.
They believe Meta's existing overall profitability provides it with the flexibility to invest in risky ventures, such as those in the Reality Labs, without jeopardising its overall financial health.
“I think markets are noticing that Meta can afford a high-risk bet at this point, particularly given the company's fantastic margins,” Thomas Monteiro, senior analyst at Investing.com, told The National.
Rolf Illenberger, founder, and chief executive of AI firm VRdirect, said: “Reality Labs is and continues to be Mark Zuckerberg’s vision for the future.
"With share prices that have increased by five times over the past 24 months, he has successfully pivoted Meta in order to further placate that vision.”
Following the announcement, the company’s stock surged 7.28 per cent in after-market trading to $509.40 a share on Wednesday.
Earlier it closed 2.51 per cent higher at $474.83 giving the company a market cap of $1.20 trillion.
The company also predicted its full-year 2024 capital expenditures to be in the range of $37 billion and $40 billion, updated from its prior range of $35 billion and $40 billion.
Total expenses for 2024 are expected to be in the range of $96 billion and $99 billion, unchanged from Meta’s previous guidance.
“While we continue to refine our plans for next year, we currently expect significant capital expenditures growth in 2025 as we invest to support our AI research and product development efforts,” said Susan Li, Meta’s chief financial officer.
Earnings beat expectation
Meta reported a 73 per cent annual increase in second-quarter net income to almost $13.5 billion.
Revenue during the April-June period rose 22 per cent to more than $39 billion, beating analysts’ expectations of $38.3 billion.
It was the fourth consecutive quarter of more than 20 per cent annual growth. Earnings per share stood at $5.2 against the expectation of $4.7.
The California-based company said it expects third-quarter revenue to hover between $38.5 billion and $41 billion. Its mid-point of $39.75 billion is above analysts’ average estimate of $39.1 billion.
Meta is well-positioned to grow at a much faster pace compared to other tech companies in the coming months, industry analysts said.
“Meta is showing signs that it is able to keep growing at over 20 per cent per quarter level in a much more efficient way than other big tech peers, such as Alphabet and Microsoft, which are not only struggling to keep revenue growth in the double digits but also are progressively taking a bigger hit on the margins side,” Mr Monteiro said.
In the second quarter, advertising impressions across Meta’s family of apps and the average price for an advertisement soared by 10 per cent year on year.
Meta’s family of apps includes Facebook, Instagram, Messenger and WhatsApp.
“We are driving good growth across our apps … we had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year," said Mark Zuckerberg, Meta founder and chief executive.
From April, Meta has stopped disclosing Facebook’s daily active users and monthly active users. It is now sharing a figure called “family daily active people”.
It stood at 3.27 billion in the last quarter, a yearly increase of almost 7 per cent.
The company's advertising revenue contributed nearly 98.1 per cent to overall sales in the second quarter, growing by about 21.6 per cent on an annual basis to more than $38.3 billion.
Revenue from other streams – including the Reality Labs unit – jumped 48.1 per cent on an annual basis to more than $742 million.
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
MATCH INFO
Uefa Champions League, last-16 second leg
Paris Saint-Germain (1) v Borussia Dortmund (2)
Kick-off: Midnight, Thursday, March 12
Stadium: Parc des Princes
Live: On beIN Sports HD
Fight card
Bantamweight
Siyovush Gulmamadov (TJK) v Rey Nacionales (PHI)
Lightweight
Alexandru Chitoran (ROM) v Hussein Fakhir Abed (SYR)
Catch 74kg
Tohir Zhuraev (TJK) v Omar Hussein (JOR)
Strawweight (Female)
Weronika Zygmunt (POL) v Seo Ye-dam (KOR)
Featherweight
Kaan Ofli (TUR) v Walid Laidi (ALG)
Lightweight
Leandro Martins (BRA) v Abdulla Al Bousheiri (KUW)
Welterweight
Ahmad Labban (LEB) v Sofiane Benchohra (ALG)
Bantamweight
Jaures Dea (CAM) v Nawras Abzakh (JOR)
Lightweight
Mohammed Yahya (UAE) v Glen Ranillo (PHI)
Lightweight
Alan Omer (GER) v Aidan Aguilera (AUS)
Welterweight
Mounir Lazzez (TUN) Sasha Palatnikov (HKG)
Featherweight title bout
Romando Dy (PHI) v Lee Do-gyeom (KOR)
Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
Last 10 NBA champions
2017: Golden State bt Cleveland 4-1
2016: Cleveland bt Golden State 4-3
2015: Golden State bt Cleveland 4-2
2014: San Antonio bt Miami 4-1
2013: Miami bt San Antonio 4-3
2012: Miami bt Oklahoma City 4-1
2011: Dallas bt Miami 4-2
2010: Los Angeles Lakers bt Boston 4-3
2009: Los Angeles Lakers bt Orlando 4-1
2008: Boston bt Los Angeles Lakers 4-2
