Meta Q3 earnings: Move fast and break things Meta Q3 earnings: Move fast and break things Meta Q3 earnings: Move fast and break things

Meta Q3 earnings: Move fast and break things

Peter Garnry

Head of Saxo Strats

Summary:  Meta has gone from its highest free cash flow in its history in Q4 2021 to the lowest in more than 10 year only three quarters later as Mark Zuckerberg is betting everything on the Metaverse as the computing platform of the future. Investors are telling Mark Zuckerberg to lower his ambitions and spending less money on the Metaverse, but the founder is doubling down saying operating losses with increase further next year from the current level of $12.7bn in the past year. Zuckerberg once had a motto of move fast and break things, and it seems he is now applying this approach to his free cash flow instead of his Metaverse product.

Doubling down on ‘Metaverse’ is a very risky strategy

In its early days, Facebook used the motto “move fast and break things” and was coined by its founder Mark Zuckerberg and worked fantastically for a young and fast-growing software company. Over the years the motto came back to haunt the company as the mentality can also be seen as a process that opens up a lot of vulnerabilities and less well thought out ideas. But Meta (the new name of Facebook) seemed to have adopted the concept once again, but instead on its products, it seems it is applying the strategy on its free cash flow generation.

Meta shocked investors yesterday by doubling down on its ‘Metaverse’ strategy. The advertising business did actually a bit better than feared despite Q3 revenue was down 5% y/y and the initial brief reaction in its share price was positive, but then investors saw that operating income was 46% from a year ago with the operating loss in its Reality Labs (division name of its ‘Metaverse’ bet) hitting $3.67bn. Meta has lost $12.7bn from operations of Reality Labs which means that operating expenses over the past year has $15.2bn for the business unit (adding back the $2.4bn in revenue) which is more than half of NASA’s entire annual budget of $25bn. Meta even said that operating losses in its Reality Labs division will increase in 2023.

Capital expenditures year-to-date has gone from $13.7bn a year ago to $22.8bn this year as Meta is investing in expensive computing equipment to run its ‘Metaverse’ and capitalizing some of its development costs on the Metaverse. Investors were also shocked about the Q3 revenue figure for Reality Labs which came in at $285mn down from $558mn a year ago and down for the third straight quarter. Not exactly the trajectory of exponential growth and blockbuster hit with consumers.

Meta’s gigantic bet on the ‘Metaverse’ combined with pricing pressure on mobile advertising from Apple’s recent data privacy change and the general slowdown in online advertising have caused the free cash flow to plunge to almost zero in Q3. Back in Q4 2021, Meta reported its highest free cash flow in the company’s history and three quarters after the lowest in more than 10 years. Investors are scared about the reckless spending compared to a year ago. Revenue is down 4% for the first nine months compared to the same period last year while operating expenses are up 19%. Why did Meta’s management not see the world changing and rein in costs much faster?

The irony of the motto “move fast and break things” is that it was meant as if something does not work then skip it and move on to the next thing. We must experiment at a fast pace to survive and grow. But in the case of the ‘Metaverse’, Mark Zuckerberg is doubling down on his vision in a sign of vanity and price, and investors are terrified. In fact, so terrified that shares are trading around $100 in pre-market trading down 27% in just two trading sessions. In our equity note yesterday we wrote that “Zuckerberg has one mission tonight” and that was to rein in his ambitions, but he failed to listen and now the stock is breaking apart.

One potential long-term casualty, if Meta’s bet on the ‘Metaverse’ turns out to a gigantic miscalculation, is governance of technology companies. The long victory march of Silicon Valley technology companies starting with the IPO of Google has led Wall Street to accept dual-class share structure allowing technology founders to retain full control of the voting shares despite not controlling the majority of the equity capital. An epic failure by Meta because its founder could not be reined in by the board of directors could cause a seismic shift in investors attitude to dual share classes.

If Mark Zuckerberg does not listen to the market and continues down the “move fast and break things” mentality on his company’s finances in his quest to create a new computing platform for the future, he could end up breaking things so much that Meta gets constrained so severely that it will go on to lose future battles against its competitors.

Meta monthly share price | Source: Saxo


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.