In brief: Meta had its best third quarter in years, beating expectations and recording its largest quarterly revenue since going public in 2012. But one less-than-welcome piece of news comes from the Reality Labs XR division, responsible for the company’s metaverse ambitions. Its revenue dropped to $210 million, its lowest point on record, while losses came in at $3.74 billion. That brings its total recorded losses since the fourth quarter of 2020 to 37.48 billion.
Meta’s fourth quarter sales were up 23% year-over-year to $34.1 billion, marking the third quarter in a row of increasing revenues and the largest YoY growth since Q3 2021. The figure beat analysts’ expectations of $33.4 billion.
Net income also beat forecasts. The YoY increase of 164% to $11.6 billion was way above expectations of $9.4 billion.
But one area that continues to bleed cash is Meta’s Reality Labs division. Its lowest-ever revenue of $210 million, down 26%, was blamed on the lower sales of the Meta Quest 2 headset ahead of the Meta Quest 3 launching on October 10. Expenses were $4 billion, resulting in total losses of $3.7 billion. Analysts had been expecting sales of $299.3 million and a $3.9 billion operating loss.
Since Meta started revealing Reality Labs’ revenue in Q4 2020, the division has lost a total of $37.48 billion.
“For Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and our investments to further scale our ecosystem,” Meta said in the report.
It was Mark Zuckerberg’s belief in the metaverse becoming the “next frontier” that prompted him to change Facebook’s company name to Meta. But the concept of a shared VR/AR virtual world has failed to capture the public’s imagination, and it’s been pushed even further into the background this year as generative AI steals all the headlines (and investment). But the CEO has long insisted that the money Reality Labs is burning through right now will eventually pay off – in about ten years, when he says the Metaverse could earn billions of dollars.
For the current quarter, Meta expects revenue of $36.5 billion to $40 billion. Analysts are expecting sales for the quarter of $38.85 billion.
As part of Zuckerberg’s “year of efficiency,” Meta has seen its employee headcount decline 24% to 66,185 workers after implementing mass layoffs. Its total costs and expenses declined 7% compared to last year, coming in at $20.4 billion.