Meta Pumps $36B in Metaverse, VR for Big Losses

  • Meta has raised $36 billion in its Reality Labs division since 2019, according to an Insider analysis.
  • The division, which includes Meta’s Metaverse and VR businesses, posted an operating loss of $30.7 billion in the same period.
  • These four charts show the sheer scale of Meta CEO Mark Zuckerberg’s big bet.

Under the direction of CEO Mark Zuckerberg, Meta has poured tens of billions of dollars into its metaverse and virtual reality operations – leading to massive losses that crush the company’s profits.

From early 2019 to September 30, 2022, Meta plowed $36 billion into Reality Labs, the division that houses its transitions and VR units, according to Insider’s analysis of the social media giant’s financial statements.

Cumulative Costs & Expenses Reality Labs

Grace Dean/Insider

While racking up those huge costs and expenses, Reality Labs has reported revenue of just $5.3 billion — giving it a cumulative operating loss of $30.7 billion for the period, according to Insider’s analysis.

Cumulative Operating Loss of Reality Labs

Grace Dean/Insider

Meta bought Oculus, the maker of VR hardware and software, in 2014. In October 2021, Zuckerberg renamed Facebook Meta to reflect his company’s push into the “metatavern” — a term borrowed from science fiction that refers in a new, immersive version of accessing the internet through virtual reality and augmented reality rather through computer screens.

Meta began publishing financials for Reality Labs in the fourth quarter of 2021.

It’s been a rocky road since the big rebrand. In the fourth quarter of 2021, Meta suffered its first drop in user numbers. In the second quarter of 2022, it suffered its first year-over-year revenue decline. Meta’s share price has fallen 70.5% year-to-date to less than $100 – a level not seen since early 2016.

Zuckerberg told Meta’s annual shareholder meeting in May that Reality Labs would be “a big contributor to the bottom line of this company” in the 2030s.

Meta’s third-quarter earnings report on Wednesday showed that Reality Labs had accumulated an operating loss of $9.4 billion in the first nine months of 2022 — and top executives said they expect the losses to widen further.

“We anticipate that Reality Labs’ operating losses in 2023 will increase significantly year over year,” said CFO David Wehner. Zuckerberg said the “biggest drivers” of the losses would be the launch of a new Quest handset and the impact of the first full year’s salaries for staff hired in 2022.

Reality Labs' revenues, operating losses, costs and expenses

Grace Dean/Insider

Costs and expenses for Reality Labs totaled $12.5 billion for the full year 2021, and the segment generated $2.3 billion in revenue.

Reality Labs’ investments in 2022 are set to surpass 2021: in the first nine months of 2022, Reality Labs’ costs and expenses rose to $10.8 billion — while the division reported only $1.4 billion in revenue, the which Meta attributed in part to lower sales of the Quest 2 VR Headset.

Wednesday’s earnings report showed Meta’s third-quarter operating margin had collapsed to 20% from 36% in the same period in 2021.

Much of the spending at Reality Labs was for salaries, Meta executives said. The company said that as of April 2022 there were more than 10,000 people working on metaverse projects. Meta’s total headcount rose 28% in the year to September 30, according to its third-quarter report.

Reality Labs' cumulative revenues, operating losses, costs and expenses

Grace Dean/Insider

Meta is under pressure from Wall Street to cut spending on its turnaround projects. The CEO of Altimeter Capital, a tech-focused hedge fund with a 0.1% stake in Meta, this week urged the company to cut its workforce by at least 20% and limit Reality Labs’ investment to no more than $5 billion annually.

Meta on Wednesday announced plans to cut costs. In addition to reducing her office footprint, Wehner said hiring will “slow down dramatically,” including laying off some staff.

And despite big losses at Reality Labs, Zuckerberg said Wednesday he’s “pretty confident” the company is headed “in a good direction.”

Meta did not respond to Insider’s request for comment.

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