Meta’s annual developers conference on Wednesday, presenting the company’s latest headsets that integrate virtual reality (VR) and augmented reality (AR) technologies. This goal has been central to the event, particularly since the company’s $2 billion acquisition of VR headset manufacturer Oculus in 2014. However, the VR segment has not met expectations. Meta’s Reality Labs division, encompassing VR, generated just over $2 billion in revenue for the year ending in June—similar to what the company’s primary advertising operation earns every five days.
Embracing Generative AI
The rise of generative artificial intelligence offers Mark Zuckerberg a chance to redefine Meta’s image without the discomfort of rebranding. Announcements included the launch of Meta AI, the company’s digital assistant, featuring voices licensed from celebrities like Awkwafina. Other notable voices include John Cena, Judi Dench, and Kristen Bell, enhancing the user experience. Furthermore, AI will enhance the Meta Ray-Ban smart glasses, which saw solid sales after launching late last year. These glasses will soon provide reminder notifications and real-time conversation translation for users.
Meta’s annual developers conference generative AI could significantly improve Meta’s image and user experience moving forward, according to wsj subscription black friday.
Competition with Tech Giants
Despite these advancements, Meta’s developments seem modest compared to the rapid innovations from competitors like Microsoft, Google, and Amazon. These companies have engaged in fierce competition over the past year to introduce new generative AI services for internet search and corporate applications. Additionally, Apple has made AI central to its recent iPhone 16 models, launched just last week, with the iPhone itself generating more revenue annually than Meta’s entire business.
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Meta’s Potential Advantages
Meta may have an edge in rolling out generative AI technology to a broad consumer base effectively and efficiently. Approximately 3.3 billion people globally use the company’s apps daily, exceeding Apple’s 2.2 billion active devices. Many of Meta’s AI tools require no financial commitment from users, making them accessible to a wider audience. In contrast, most Apple customers must purchase an iPhone 15 to access Apple Intelligence, which will be available next month.
Mixed Sales Performance for Apple
Analysts have noted that recent iPhones are not performing well in sales, raising concerns about Apple’s market position. Apple’s shares have risen less than 3% since the latest iPhones were announced, reflecting consumer sentiment. The year-to-date increase of less than 18% trails the performance of the S&P 500, indicating market struggles. In contrast, Meta’s shares have surged over 60% this year, rebounding from a significant drop in April.
Analyst Outlook on Meta
While the $16.7 billion annual operating loss for Reality Labs may deter some investors, 85% of analysts rate Meta as a buy. This rating surpasses those for Google-parent Alphabet at 78% and Apple at 68%, according to FactSet data. Justin Post from BofA Securities remarked that Meta is a top AI play in the consumer Internet sector. Similarly, Gil Luria from D.A. Davidson initiated coverage of Meta with a buy rating earlier this month. He noted that the company’s AI investments are already benefiting its core advertising business significantly.
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