Meta’s metaverse division bleeds $3.7B in Q2

The company formerly known as Facebook remains set on its metaverse ambitions despite its division focused on that segment routinely losing billions by the quarter. 

Meta’s Reality Labs unit — comprising augmented reality, virtual reality and the company’s metaverse software platform — suffered a net loss of about $3.7 billion in the second quarter, the company revealed on Wednesday. 

But that financial hit is just the norm in recent quarters. 

Reality Labs notched a net loss of $13.7 billion in 2022 and bled nearly $4 billion during the first three months of 2023.

Facebook changed its name to Meta in October 2021, signaling its focus on metaverse-related projects. The company continues to double down on that vision. 

“This is a very long-term bet,” Meta CEO Mark Zuckerberg said during the company’s earnings call Wednesday. “At a deep level, I understand the discomfort that a lot of investors have with it, because it’s just outside the model of, I think, even most long-term investors and how you would think about this.”

The executive added that he expects everyone who wears glasses today will one day have “smart glasses.” Time spent using televisions and computers are likely to evolve to look more like immersive virtual reality experiences, Zuckerberg said. 

“Look, I can’t guarantee you that I’m going to be right about this bet,” he added. “I do think that this is the direction the world is going in.”

Reality Labs’ operating losses are expected to increase “meaningfully” year-over-year “due to our ongoing product development efforts in augmented reality/virtual reality and investments to further scale our ecosystem,” Meta said in a press release Wednesday.

The company, for example, is set to introduce its Meta Quest 3 virtual reality headset this fall — a launch that demands a lot of expenses in the near term, Zuckerberg said. The product’s debut is slated roughly three years after Meta brought its Quest 2 to market. 

Meta added in its news release that it expects total expense growth in 2024 “as we continue to invest in our most compelling opportunities, including artificial intelligence (AI) and the metaverse.”

Chief Financial Officer Susan Li said Reality Labs has an ambitious, multi-faceted roadmap that requires continued research and development investments. 

“We really have a long-term time horizon for evaluating the return on our investments here,” she noted.

Like in past quarters, Meta’s “Family of Apps” segment, which includes Facebook, Instagram, Messenger, WhatsApp and other services, more than offset the Reality Labs loss. In total, that category posted income of nearly $13.1 billion in the second quarter. 

Updated July 26, 2023 at 6:32 pm ET: Added statements from Meta CEO Mark Zuckerberg and Chief Financial Officer Susan Li.

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