Poor sales have reportedly forced Apple to cut production of the Vision Pro headset that it had hoped would herald a new era in “spatial computing”.The tech company also reduced marketing for Vision Pro by more than 95% last year, according to the market intelligence group Sensor Tower in figures first reported by the Financial Times.Apple continues to sell iPhones, iPads and laptops in the millions each quarter, but analysts say sales of Vision Pro headsets, which cost at least £3,199 ($3,499) each, have b ...

Core Viewpoint - Meta has paused its program to share Meta Horizon OS with third-party device makers to focus on developing first-party hardware and software for the VR market [1][2]. Group 1: Program Details - The program aimed to create a new generation of hardware for VR users to engage with Meta's digital worlds [1]. - Initially announced in April, the program included partnerships with companies like Asus, Microsoft's Xbox, and Lenovo to develop hardware compatible with Meta Horizon OS [3]. - There have been few updates on the program since its announcement, with a spokesperson indicating ongoing collaboration with business partners to expand Horizon OS into more devices [4]. Group 2: Shift in Focus - Horizon OS was designed to provide mixed reality experiences and enhance social presence through advanced tracking technologies [5]. - Recently, Meta's interest in the metaverse has waned as the company shifts focus towards AI, with reports indicating potential budget cuts of up to 30% for the metaverse group within Reality Labs [6]. - Meta confirmed plans to redirect investments from the metaverse towards AI glasses and wearables, reflecting a strategic pivot in its technology development priorities [6].

Group 1: Market Performance - The Magnificent Seven stocks, which led the stock market rally from 2023 to 2024, are showing signs of weakness in 2023, with Apple, Tesla, Amazon, and Meta Platforms underperforming the average S&P 500 Index peer [1] - Microsoft's performance is barely in line with the S&P 500, while Nvidia has year-to-date gains of approximately 36%, which is considered modest compared to its past performance [1] Group 2: Cost-Cutting Measures - Following a significant market selloff in 2022, U.S. tech stocks, including Big Tech companies, implemented aggressive job cuts, with Meta Platforms being the most aggressive, as CEO Mark Zuckerberg labeled 2023 as the "year of efficiency" [2] - Meta's stock nearly tripled in 2023, making it the second-best performer among the Magnificent Seven, only behind Nvidia [2] Group 3: Capital Expenditure and AI Spending - Tech companies are facing scrutiny over their increasing artificial intelligence (AI) spending, with Meta experiencing a stock decline after its Q3 2025 earnings release despite beating revenue and earnings expectations [2] - Meta's capital expenditures for 2025 are projected to be around 36% of its revenues, indicating a continued trend of high spending in the AI sector [2] Group 4: Reality Labs and Metaverse Losses - Meta plans to reduce its metaverse spending by up to 30% next year, as the Reality Labs segment, which includes hardware products like Quest headsets, has been incurring significant losses [3] - In Q3 2025, Reality Labs reported an operating loss of $4.4 billion, which was nearly ten times its revenues for that quarter, and has consistently faced similar losses in previous quarters [3] - Since 2021, the Reality Labs segment has accumulated losses exceeding $70 billion, highlighting the financial strain on Meta Platforms [3]

Core Insights - Meta is planning budget cuts of up to 30% in its Reality Labs division, which may lead to job cuts affecting employees working on Horizon Worlds [1][3] - The company has faced over $60 billion in losses in Reality Labs since 2020 and is increasing its AI spending amid a competitive landscape [4] - Meta's stock rose by 4%, adding $69 billion to its market cap, following news of the budget cuts [4] Budget Cuts and Job Uncertainty - The potential budget cuts are part of a broader strategy discussed by CEO Mark Zuckerberg with executives [2] - Employees are uncertain about whether cost reductions will lead to layoffs, with most cuts expected to come from operating expenses rather than salaries [3] Organizational Changes - Meta has previously reorganized its metaverse unit, appointing new leaders for its metaverse efforts [5] - Vishal Shah, a key figure in Meta's metaverse initiatives, is transitioning to a different division, while Apple design leader Alan Dye has been hired to lead a new creative studio [6] Previous Restructuring Efforts - In April, Meta cut an undisclosed number of Reality Labs employees as part of a restructuring, affecting its gaming division and VR fitness app team [7] - The company has emphasized the need to drive sales and engagement, particularly in mixed reality, to ensure the long-term success of its metaverse plans [8] Investor Scrutiny - The significant losses in Reality Labs have raised concerns among investors, with analysts questioning when these losses might decrease [8]

Microsoft - Microsoft stock is rated as a "Strong Buy" by 39 out of 48 analysts, with an average target price of $630.59, indicating a potential upside of 32.6% [1] - The company has strengthened its partnership with OpenAI, gaining exclusive Azure privileges and extended access to models and IP [2] - Microsoft ended the quarter with $102 billion in cash and short-term investments, and has a record backlog of $392 billion, positioning it well for growth [2] - The company invested $34.9 billion in AI and cloud expansion, with half allocated to shorter-lived chips and hardware, and the other half for long-term infrastructure [3] - In the fiscal 2026 first quarter, Microsoft reported revenue of $77.7 billion, a 17% increase year-over-year, and earnings of $4.13 per share, up 21% [4] Amazon - Amazon stock is also rated as a "Strong Buy," with 49 out of 57 analysts recommending it, and an average target price of $295.85, suggesting a potential upside of 36% [8] - Amazon Web Services (AWS) reported a 20% year-over-year revenue increase in Q3, with an annualized revenue run rate of $132 billion and a backlog of $200 billion [7] - The company is investing over $90 billion this year to prepare for an AI-driven future, while maintaining healthy profitability with EPS rising 36% to $1.95 [7] Meta Platforms - Meta Platforms stock is rated as a "Strong Buy" by 43 out of 56 analysts, with an average price target of $838.62, indicating a potential upside of 42.3% [11] - The Family of Apps segment generated $50.8 billion in revenue, a 26% increase year-over-year, driven by strong advertising demand [9] - Reality Labs revenue increased by 74% to $470 million, supported by interest in AI-enabled products [10] Alphabet - Alphabet stock is rated as a "Strong Buy" by 43 out of 55 analysts, with an average target price of $317.92, suggesting a potential upside of 6% [14] - The company reported $102.3 billion in revenue for Q3, marking its first-ever $100 billion quarter, with a 16% year-over-year growth [12] - Google Cloud revenue grew by 34% to $15.2 billion, with a backlog of $155 billion, up 82% from last year [13]

Core Insights - Meta Platforms has transitioned from a social networking site to a leader in artificial intelligence and virtual/augmented reality, with a focus on building the metaverse and enhancing user engagement through AI [3][6][9]. Business Overview - Meta operates a suite of apps including Facebook, Instagram, and WhatsApp, which are used by billions for social interaction and community building [1][6]. - The company generates most of its revenue from targeted advertising across its platforms, utilizing user data to optimize ad placements [11]. Financial Performance - In Q3 2025, Meta reported a 26% year-over-year revenue increase to $51.24 billion, driven by higher ad impressions and user engagement [13]. - Daily active users across its apps grew by 8% year-over-year to 3.54 billion, with ad impressions increasing by 14% and average ad prices rising by 10% [14]. AI and Technology Investments - Meta is heavily investing in AI, with a focus on developing advanced conversational AI and integrating AI capabilities across its platforms [9][12]. - The company anticipates significant capital expenditures for AI infrastructure, projected to exceed $100 billion in 2026 [17]. Reality Labs Division - Reality Labs, responsible for VR and AR development, has been a major financial burden, posting an operating loss of $4.4 billion in the most recent quarter [16]. - Despite the losses in Reality Labs, the core advertising business remains profitable [16]. Recent Developments - Meta has established the Meta Superintelligence Labs to consolidate its AI efforts, focusing on large foundation models and AI-powered products [18][19]. - A joint venture with Blue Owl Capital aims to develop a $27 billion AI-optimized data center campus in Louisiana, part of a broader strategy to enhance AI infrastructure [20].

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **AI glasses** market, particularly focusing on **Meta's** performance and its impact on the supply chain, including companies like **Goertek** and **Sunny Optical**. Core Insights and Arguments 1. **Sales Performance of Meta AI Glasses**: - The new **Ray-Ban Meta glasses** and **Oakley Meta Vanguards** are performing well, with the Ray-Ban display glasses selling out within **48 hours** [1][2] - **Reality Labs** revenue increased by **74% YoY** to **US$470 million**, driven by strong demand for AI glasses and stocking up of Quest headsets ahead of the holiday season [1][2] 2. **Future Revenue Expectations**: - Anticipated decline in **4Q25** revenue due to pull-forward stocking and a high base from the previous year, although this is partially offset by significant growth in AI glasses [1][2] 3. **AI Glasses Shipment Growth**: - **3Q25** global AI glasses shipments reached approximately **1.65 million units**, a **370% YoY** and **90% QoQ** increase, with Meta accounting for **1.12 million units** [3] - Meta's AI glasses shipments since launch in **4Q23** have approached **4 million units**, with **2.3-2.4 million units** shipped in the first nine months of **2025** [3] 4. **Production Forecast Adjustments**: - Meta has raised its production forecast for **2025/26** to **12 million/30 million+ units**, up from previous estimates of **10 million/20 million** [3] 5. **Beneficiaries of AI Glasses Market**: - **Goertek** and **Sunny Optical** are identified as key beneficiaries of the AI glasses market, with Goertek gaining market share in new AI glasses series and Sunny Optical continuing to supply camera modules [1][3] Additional Important Insights 1. **Market Dynamics**: - Other brands in the AI glasses market have also seen significant growth, with some brands experiencing a **1667% YoY** increase in shipments [3] 2. **Valuation Insights**: - Goertek's target price is set at **Rmb38**, based on a **28.2x 2026E P/E**, reflecting stabilizing AirPods shipments and AI smart glass demand [5] - Sunny Optical's target price is set at **HK$103**, based on a **23x 2026E P/E**, driven by a new camera cycle in smart vehicles and XR [7] 3. **Risks to Consider**: - Key risks for Goertek include lower-than-expected VR/AR penetration rates and increased competition leading to ASP pressures [6] - For Sunny Optical, risks include slower shipments of domestic-brand smartphones and high inventory levels impacting volume growth [8]

Core Insights - Meta's third-quarter earnings report led to a nearly 9% drop in share price despite beating revenue expectations with $51.24 billion, primarily due to a $15.9 billion tax charge and concerns over AI investments [1][2]. Group 1: Capital Expenditure and AI Investments - Meta plans to spend between $70 billion and $72 billion on infrastructure in 2023, with expectations of significantly larger expenditure growth in 2026 as AI workloads increase [3][4]. - The company is focusing on building novel capabilities and plans to invest aggressively in data centers and third-party cloud capacity, which will exert upward pressure on capital expenditures [4][5]. - Employee compensation is projected to be the second-largest contributor to expense growth in 2026, reflecting the hiring of AI specialists and new technical recruits [5][9]. Group 2: Reality Labs Performance - Meta's Reality Labs reported $470 million in revenue but incurred an operating loss of $4.43 billion, slightly improved from a $4.53 billion loss in the previous quarter [9][10]. - Revenue for Reality Labs received a temporary boost from retailers stocking Quest headsets ahead of the holiday season, but challenges remain due to the lack of new model releases [10][11]. Group 3: Tax Charge Implications - The company faced a one-time $15.9 billion tax charge due to changes in tax legislation, which allowed for a valuation allowance against federal deferred tax assets [11][12]. - Without this charge, Meta's effective tax rate would have dropped from 87% to 14%, positioning the company favorably for future cash tax payments [12][13]. Group 4: AI Impact on Engagement - AI-powered recommendation systems have increased user engagement, with time spent on Facebook rising by 5%, Threads by 10%, and video viewing on Instagram by over 30% [14][15]. - Meta's generative AI features for advertisers are expected to enhance performance and potentially offset losses from Reality Labs [15][16]. Group 5: AI Glasses Market Potential - Meta's AI-powered glasses are anticipated to become a profitable investment, with strong sales reported and collaborations with Ray-Ban and Oakley progressing well [17][18]. - The new Ray-Ban Displays sold out quickly, indicating strong consumer interest, and the AI capabilities are expected to be a primary usage driver for the glasses [18].

Core Insights - The artificial intelligence revolution has positioned Baidu and Meta Platforms as leaders in innovation and investor interest, each adopting distinct strategies for AI monetization [1][2] - Both companies are heavily investing in foundational models, cloud infrastructure, and next-generation computing, albeit in different markets and regulatory environments [1][2] Baidu's Case - Baidu is transforming into an AI-first enterprise, focusing on AI Cloud, autonomous driving, and modernizing its search platform, which reshapes its growth and financial trajectory [3] - In Q2 2025, Baidu's total revenues declined by 4% year-over-year, with Baidu Core revenues at RMB 26.3 billion ($3.66 billion) and non-online marketing revenues up by 34% due to rising demand for AI-powered solutions [4] - Operating income fell by 45% due to increased infrastructure and compute costs associated with AI deployments, with Q3 2025 revenue estimates at $4.34 billion, indicating a 9.33% year-over-year decline [5] Meta's Case - Meta Platforms is at the forefront of AI innovation, integrating AI across its products and user experiences, with Q2 2025 revenues rising by 22% year-over-year to $47.52 billion [9] - AI is central to Meta's growth strategy, with Llama models enhancing user engagement and content delivery, and over one billion users interacting with Meta AI monthly [10] - In Q2 2025, Meta's operating income reached $20.44 billion, up 38% year-over-year, with a 43% operating margin, indicating strong profitability metrics [11] Valuation and Performance Comparison - Meta Platforms commands a higher valuation with a forward P/E of 24.99x compared to Baidu's 16.48x, reflecting investor confidence in Meta's ability to monetize AI effectively [14] - Baidu's shares have increased by 57.1% year-to-date, driven by optimism around its AI transformation, while Meta's shares rose by 25.3% due to consistent earnings growth and visible AI monetization [17] - The growth trajectories of Baidu and Meta differ, with Baidu's reinvestment cycle indicating a longer path to stable profitability, while Meta's integrated AI ecosystem positions it for more immediate benefits [20]

Core Insights - Meta CEO Mark Zuckerberg envisions a "personal superintelligence" as the next major wearable technology, potentially surpassing smartphones in functionality [2] - The company aims to empower individuals through AI, contrasting with concerns that AI may replace jobs and societal roles [2] - Meta's Reality Labs continues to incur significant losses despite modest revenue growth, indicating challenges in monetizing its hardware initiatives [4] Financial Performance - Meta's Q2 revenue increased by 22% to $47.52 billion, the fastest growth since 2021, driven by a 9% rise in ad prices and an 11% increase in impressions [5] - Net income rose by 36% to $18.34 billion, improving the operating margin from 38% to 43% [5] - Reality Labs reported an operating loss of $4.53 billion, which is approximately $50 million wider than the previous year, while revenue grew by 5% to $370 million [4] AI and Product Development - AI is already enhancing Meta's products, with superintelligence expected to further accelerate progress in five key areas [3] - New recommendation models improved ad conversions by 5% on Instagram and 3% on Facebook [6] - The MetaAI assistant has surpassed 1 billion monthly users, with plans for further improvements through the next Llama model [6] Market Position and Strategy - Meta is leveraging current advertising revenue to fund future AI developments, positioning itself as a leader in personal superintelligence [7] - The company is committed to open-sourcing its AI models, although it acknowledges the practical limitations of larger systems [3] - Meta's family of apps now attracts 3.48 billion daily users, reflecting a 6% year-over-year increase [5]