Meta, the parent company of Facebook, reported its fourth-quarter results on February 1, revealing a substantial loss in its mixed-reality division, Reality Labs, despite impressive revenue figures.
This development has raised questions about the company’s ongoing investments in augmented and virtual reality (AR/VR) technology, as it anticipates a meaningful increase in losses for the upcoming year.
Reality Labs’ Q4 losses and revenue
In the fourth quarter of 2023, Reality Labs, responsible for Meta’s VR/AR research, incurred an operating loss of $4.65 billion. Simultaneously, the division generated nearly $1.1 billion in revenue, marking it as one of the most profitable quarters in its history.
This substantial loss is the largest quarterly operating deficit since Meta first began reporting Reality Labs’ financials in the fourth quarter of 2020.
Yearly performance and revenue sources
For the entirety of 2023, Reality Labs reported total revenues of just under $1.9 billion, with over half of this revenue coming in during the year’s final quarter. A notable contributor to this surge in revenue was the successful release of the Meta Quest 3, a VR headset.
Despite this strong showing in revenue, the division’s total operating loss for the year was reported at $16.1 billion, marking a 17.5% year-on-year increase from the previous year.
Mark Zuckerberg’s perspective and future investments
During the earnings call, Meta’s founder and CEO, Mark Zuckerberg, attributed Reality Labs’ robust revenue to a “strong holiday season” for the Quest VR headsets. He highlighted the promising start of the Quest 3, which will be released in October 2023.
Additionally, Zuckerberg emphasized Meta’s commitment to artificial intelligence (AI) and the metaverse, stating they were “major parts of our long-term vision.” He reiterated their intention to continue substantial investments in both areas.
Zuckerberg expressed optimism about the next generation of AR, VR, and mixed reality computing platforms, foreseeing them as the foundation for future social experiences.
He acknowledged the rapidly evolving field of AI and stated, “These days, there are a lot of questions about AI that I get, and that field is moving very quickly.”
Anticipated losses and investment plans
Meta’s Chief Financial Officer, Susan Li, acknowledged the expected increase in losses for Reality Labs, stating that they would “increase meaningfully year-over-year.” These losses are primarily attributed to ongoing product development in the AR and VR space and investments aimed at scaling the ecosystem.
Despite this news, Meta’s shares remained relatively flat on the announcement day. However, after the market closed, the company’s stock price experienced a significant boost, surging over 15% to nearly $455 per share.
Strong full-year revenue and dividend announcement
Meta reported full-year 2023 revenue of $134.9 billion, surpassing estimates from Wall Street research firm Zacks and reflecting a remarkable 16% increase compared to its 2022 results. In a noteworthy move, Meta announced that it would pay its first-ever dividend of 50 cents per share on March 26, signaling its confidence in its financial position and its commitment to rewarding shareholders. The company also intends to issue quarterly dividends on an ongoing basis.
