Meta says XR losses will increase due to product development

Meta expects its continued “loss” in the reality labs segment to increase in 2024.

Reality Labs is the meta division behind Quest headsets, smart glasses, meta avatars, Horizon, and research and development for AR glasses and their neural wristband input device.

In its third quarter earnings call today, Meta reported Reality Labs’ revenue of $210 million for the quarter against expenses of $3.95 billion, leading to a loss of $3.7 billion.

This revenue is slightly lower than the third quarter of last year, but not surprising. Q3 ended on September 30, which means it doesn’t include sales of the Quest 3, and few people were buying the Quest 2 in the final months leading up to its successor’s launch. We should see the release of Quest 3 in Q4 revenue figures.

So far this year, Meta’s Reality Labs division has “lost” more than $11 billion. But while describing this as a loss is technically financially correct, in reality it is more accurate to describe it as a long-term investment. XR headsets like the Quest are still relatively early technology and haven’t matured much, and Meta hasn’t released its first AR glasses yet. More than 50% of reality labs spend on research and development of augmented reality glasses.

Meta CFO Suzanne Lee said she expects Reality Labs’ losses to increase in 2024, due to “ongoing product development efforts” and “investments to further expand our ecosystem.”

This “product development” probably refers to the AR glasses at least, but may also refer to Quest headsets. Meta reportedly plans to release a cheaper VR-based headset than the Quest 3 next year, likely called the Quest 3 Lite, and is reportedly working with LG on a Quest Pro 2 for 2025.

What is meant by “investing to further expand our ecosystem” is less clear. This could also be a reference to the Quest 3 Lite, which is expected to sell far more units than the Quest 3, or it could refer to VR content and developer budgets. Meta financed two AAA Quest games this year, Asgard’s Wrath 2 and Assassin’s Creed Nexus, and has acquired eight studios that may make more next year. It also continues to invest heavily in its Horizon “metaverse” platform, recently bringing it to mobile and web and building a first-party studio to launch high-quality games within it.

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