META’s Reality Labs is still bleeding money.
The division, which focuses on the company’s AR, VR and Metaverse efforts, reported a $4.48 billion loss in second-quarter earnings on Wednesday. Reality Labs’ revenue accounted for less than 1% of Meta’s total revenue.
Meta stock soared about 9% when the market opened on Thursday.
The numbers come after Yahoo Finance reported last week that Reality Labs’ multibillion-dollar losses were the result of a lack of clear vision, frequent restructuring, and a leader with no expertise in AR and VR. It was done.
We interviewed more than a dozen former Reality Lab employees who have been granted anonymity due to confidentiality agreements and fear of jeopardizing future employment opportunities. Since this report, more insiders have reached out to Yahoo Finance to confirm details of the story and provide additional insight.
CEO Mark Zuckerberg said at the company’s earnings conference, “Several years ago, we predicted that holographic AR would be possible before smart AI, but now those technologies are actually being realized.” seems to be completed in the reverse order.” “We are well-positioned for that because of the investment we have already made in Reality Labs.”
Losses at the Metaverse division have exploded over the past four years, even as Zuckerberg has shifted focus to AI. In 2020, Reality Labs lost more than $6 billion. The sector sank $10 billion in 2021, $13 billion in 2022, and $16 billion in 2023.
Reality Lab laid off about 100 employees in June, according to two people familiar with the matter. The layoffs include several vice presidents and managers, as well as dozens of employees from research and technical engineering teams. Insiders told Yahoo Finance that several “big bet projects” were also canceled.
“Software companies are trying to get into hardware, but they don’t know how to manage it,” said a former engineering department manager. “They’re ahead of the curve in launching products and building work teams, even though they don’t even know what the technology is yet.”
Meta’s current hardware products on the market include the Quest 3 and Quest Pro headsets and Ray-Ban smart glasses. The company announced in April that it would offer its Horizon operating system to outside hardware companies.
The company recently teased that a prototype of its augmented reality glasses is almost ready to be unveiled. Meta, known internally as Orion, has spent tens of billions of dollars on the nine-year project.
But some former employees who worked on the glasses have doubts whether the company intends to release them to the public.
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“We expect significant losses for each device on the glasses,” said the former engineer. “I think it’s probably closer to the $1,000 range per unit, but it depends on what you’re ultimately selling it for and what features you end up with. Whether it’s going to sell or not. I don’t even know.”
Metaverse became a buzzword in 2021 after Zuckerberg announced that his social media company Facebook would be renamed Meta. Zuckerberg passionately argued that in the near future, humans will socialize, work, and play in shared virtual worlds.
However, recent data suggests that the metaverse revolution may be on the wane. A study by consumer analytics firm CivicScience found that AR and VR headset adoption and purchase intentions have plateaued this year.
According to market intelligence firm IDC Global, shipments of AR and VR headsets in the first quarter of 2024 decreased by about 67% compared to the same period last year. Meta’s market share has plummeted as other companies like Apple (AAPL) enter the market, down from 62% in the fourth quarter. 37% in Q1 2023-2024.
“When it came to AR and VR, Meta came up with a solution even though there wasn’t really a problem,” says a former Reality Labs employee. “It’s not worth the investment they’re putting in. If they were smart they would reduce the size of the operation to 10% of what it is now. Someone else would come up with the hardware and Meta’s Horizon n OS. Then Zack would be a much happier member of the Metaverse.”
Yasmin Khorram is a senior reporter at Yahoo Finance. Follow Yasmin on Twitter/X @YasminKhorram And also on LinkedIn. Send newsworthy tips to Yasmin: yasmin.khorram@yahooinc.com
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