VR, AR and AI should go the way of the smartphone and sooner or later become technologies used every day. Whether the bet will work remains to be seen. In the case of Meta Platforms' efforts, they lead to heavy losses, of which artificial intelligence is largely responsible. However, there is no threat of bankruptcy for the tech and social media giant.
Meta Platforms, the company behind Facebook, Threads, Instagram, WhatsApp and Quest, has presented its latest quarterly figures. While overall sales increased significantly compared to the previous year, one division caused significant losses.
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Reality Labs wastes billions of dollars every month. However, Meta Platforms wants to stick to the initiative and hopes for a long-term return on investment.
Reality Labs with a loss of $3.85 billion
In the three months ended March 31, 2024, Meta Platforms' services generated $36.5 billion in revenue, while profit was $12.4 billion.
Reality Labs alone generated revenue of $440 million – primarily driven by sales of the Quest 2 and Quest 3. Also those created in collaboration with Ray-Ban Meta smart glasses had their share.
The department's expenses, however, totaled $4.3 billion, resulting in a divisional loss of $3.85 billion.
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Meta Platforms’ quarterly figures at a glance:
- Revenue: $36.5 billion (up 27% year over year)
- Net income: $12.4 billion (up 117% year over year)
Reality Labs:
- Revenue: $440 million (up 30% year over year)
- Operating loss: $3.85 billion, compared to a loss of $3.99 billion in the first quarter of last year
So basically everything stays the same: Meta Platforms can continue its success story and is weakened by the VR/AR/AI department.
Reality Labs emerged from Oculus VR and is the research unit of Meta Platforms that develops hardware and software for virtual reality and augmented reality. These include virtual reality headsets like Quest, but also games like “Horizon Worlds”.
VR and AR are by no means the only cost factor. In June 2022, various AI projects were assigned to the Reality Labs division. This includes the fundamental AI research laboratory FAIR, which is now part of the department.
The aim is to catch up with the AI competition
Despite the fact that Meta Platforms has been losing more than a billion US dollars every month on Reality Labs for years, the commitment is to be maintained.
The US company wants to increase investment in AI and is raising expected spending for the full fiscal year to $35 billion to $40 billion – up from previously forecast $30 billion to $37 billion. There is expected to be a further increase in 2025. The aim is to catch up with the AI competition.
These are investments that Meta Platforms hopes will pay off in the long term. We continue to expect that “operating losses will increase significantly compared to the previous year due to our ongoing product development and our investments in further scaling our ecosystem.”
The current trend is illustrated by a graphic published on Twitter/X. It compares sales and expenses:
Artificial intelligence is also a big topic in the gaming industry:
AI investments will pay off (perhaps) years from now
According to Meta CEO Mark Zuckerberg, it will take years for the company's AI investments to develop into profitable services. At the same time, he acknowledged that it is a strategy that has had an impact on the share price in the past.
The latest annual report also temporarily caused the value to fall by up to 17 percent. However, investors who got involved a year ago are still looking at an increase of around 100 percent. Nvidia shares were able to benefit significantly more from the AI boom. Here it is more than 230 percent in the twelve-month period.
Ultimately, it is a “very good, long-term investment for us and for investors,” Zuckerberg continued. And the first signs are positive here too.
“But building leading AI will also be a larger undertaking than the other experiences we’ve added to our apps. And that will probably take several years,” estimates the Meta CEO.
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