Meta’s Reality Labs lost $13.7 billion on VR and AR last year

Mentions of the “metaverse” were relatively few and far between in Meta’s quarterly earnings call this week — we counted a mere seven mentions compared to 23 for “AI” — but the company’s investment into its vision of a VR-connected social future remains colossal.

Starting in 2021, Meta began breaking out its Reality Labs VR and AR division into its own segment for financial reporting purposes. That makes it possible to see just how much Meta is pouring into those areas, and the numbers are staggering.

Meta reported $13.7 billion in operating losses for Reality Labs for 2022, more than the already jaw-dropping $10.2 billion it sunk into the division in 2021. Reality Labs brought in $2.16 billion last year in revenue, a drop from $2.27 billion in 2021.

For scope, remember that Meta bought Oculus — the pioneering VR hardware company that formed a groundwork for its efforts — for $2 billion back in 2014. The company’s investment in the area has only escalated, with the company picking up a number of major software companies including Beat Saber’s creator and now Within, developer of the virtual workout app Supernatural.

Meta hasn’t disclosed its headcount numbers for Reality Labs, but the company reportedly had 17,000 employees in the division prior to layoffs late last year. Staffing and hardware development account for the lion’s share of the cash it’s spent in the area.

Meta CFO Susan Li said that the company expects its annual losses for Reality Labs to be even higher in 2023. “…We’re going to continue to invest meaningfully in this area given the significant long-term opportunities that we see,” Li said, calling its AR, VR and metaverse software efforts “a long-duration investment.”

Meta plans to launch a next-generation consumer headset later in 2023, like a revamped version of its Quest hardware featuring mixed reality. Apple, one of the only consumer-focused companies poised to compete with Meta in the sector, is widely expected to launch a new AR/VR headset soon.

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In this week’s earnings call, Meta CEO Mark Zuckerberg emphasized the fact that Reality Labs encompasses AR, VR and metaverse-related software (Horizon Worlds, etc.) at the company. “I think the software and social platform might be the most critical part of what we’re doing, but software is just a lot less capital intensive to build than the hardware,” Zuckerberg said.

Meta may publicly de-emphasize its metaverse efforts to please skeptical investors, but the company appears ready to the stay the course on VR and AR.

“… None of the signals that I’ve seen so far suggests that we should shift the Reality Labs strategy long term,” Zuckerberg said. “We are constantly adjusting the specifics of how we execute this, so I think that we’ll certainly look at that as part of the ongoing efficiency work.”