Meta's Reality Lab division loses billions as metaverse spending ramps

Meta's Reality Labs division has reported billion-dollar operating losses for six consecutive quarters, showing that Meta's new ambitious plans for the metaverse may not pay off any time soon.

The metaverse is an expensive new frontier. Meta Technologies Inc. wants to pioneer the nebulous metaverse, and is spending billions to lay down foundational technologies for the new inter-connected, commercialized and consumer-friendly social infrastructure. This will be a long-term strategy will many more years of expenses, as Meta CEO Mark Zuckerberg doesn't expect the metaverse to mature until the 2030s.

Meta's Reality Labs division is doing much of the heavy lifting for its metaverse ambitions. Reality Labs, which includes VR headsets, AR technologies, and new software platforms like Horizon Worlds, is a big part of Meta's R&D investments due to its experimental focus on XR.

As such, Reality Labs is far from profitable. The segment has made up less than 3% of Meta's quarterly revenues, but Reality Labs has made up nearly 20% of the company's quarterly expenses.

In Q1'22, Reality Labs posted an operating loss of $2.96 billion on $695 million revenues. These results are typical for the R&D segment.

Meta's Zuckerberg explains that Reality Labs is not only building software for the metaverse, but also headsets. Reality Labs is constantly iterating and experimenting, working on as many as two or three generations' worth of VR and AR hardware at once.

"Just a bit of context that may be useful on why we've ramped expenses so much is especially with the success that we've seen with Quest 2, we're now basically funding product teams to be building our future products, two or three versions into the future. Because when you're designing hardware...these are multiyear plans that you're building and kind of figuring out all the pieces that are going to go into that.

"So we have multiple teams in parallel that we've sort of now spun up. This goes for VR as well as augmented reality and the other work that we're doing and is sort of driven by the success that we feel like we're seeing in the markets and the technology is starting to be ready to really ramp up."