Reality Labs, Meta’s virtual reality and metaverse branch, has recorded $3.7bn loss in its Q3 2022 results, accumulating a total of $9.4bn in losses for the year.
The loss is partly fuelled by increased investment into the Reality Labs platform, with Meta underlining that such investments are key to ‘growing overall company operating income in the long run’.
Revenue for Reality Labs dropped to $285m, almost half of what it earned in its Q2 results of $452m and falling significantly short of analysts’ predictions, which touted the firm to land revenue of $406m.
Overall, Reality Labs losses of $3.7bn in Q3 are an increase from the $2.8bn loss figure from the previous quarter, putting its total losses for the year to $9.4bn, close to the $10.2bn figure it lost throughout 2021.
Furthermore, Meta forecasts Reality Labs losses to grow “significantly” year-over-year during the course of 2023.
Meta stated: “We do anticipate Reality Labs operating losses in 2023 will grow significantly year-over-year. Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run.”
Mark Zuckerberg, Meta CEO, did acknowledge concerns surrounding Meta’s trajectory during a year of struggle, but he also added that it would be a “mistake” to not invest in it’s metaverse project, believing it will play a pivotal role in the future of the company.
Meta, formerly known as Facebook, rebranded in 2021 under its current name and signified a new direction for Zuckerberg and the company, shifting its focus to the metaverse and virtual reality spaces.
Meta’s overall revenue fell 4%, with costs and expenses rising 19% from the previous year, reporting a quarterly net income of $4.4bn, down significantly from the $9.2bn it earned in the same quarter in 2021.
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Despite Meta’s struggles, its Q3 results did show a surge in usage of Facebook monthly active users, growing 2% year-over-year, whilst Zuckerberg also highlighted the “strong engagement” new social media products like ‘Reels’ have garnered.
He said: “Our community continues to grow and I’m pleased with the strong engagement we’re seeing driven by progress on our discovery engine and products like Reels.
“While we face near-term challenges on revenue, the fundamentals are there for a return to stronger revenue growth. We’re approaching 2023 with a focus on prioritisation and efficiency that will help us navigate the current environment and emerge an even stronger company.”
Meta forecasts its total revenue in its Q4 results to be between $30 – $32.5bn, whilst also noting it will be making “significant changes across the board to operate more efficiently”.
Q4 results from last year revealed Meta had earned $33.67bn in revenue, a 3.5% decrease on where it estimates to be in this year’s following quarter.
Meta investor Brad Gerstner recently wrote an open letter to Meta on its current practices, warning the tech giant that it’s “time to get fit”.
Gerstner directed some of his concern in the large investments Meta has been making in its Reality Labs metaverse venture, believing its costs should drop to $5bn per year or risk moving into an “unknown future”.
Gernster commented: “We think Meta company should cap its metaverse investments to no more than $5bn per year with more discrete targets and measures of success, as opposed to today’s much more ambitious and open-ended strategy.
“An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards.
“Meta needs to get its mojo back. Meta needs to re-build confidence with investors, employees and the tech community in order to attract, inspire, and retain the best people in the world. In short, Meta needs to get fit and focused.”