Meta reported a $4 billion loss for its Reality Labs division in its latest quarterly earnings, continuing a trend of significant financial shortfalls for the unit responsible for augmented and virtual reality products.
This loss is consistent with a total of $83.5 billion in losses over the last 21 quarters since 2021, averaging $4 billion per quarter. As the company reduces its metaverse investments, it plans to allocate even more resources to artificial intelligence (AI), with projected spending of $125 billion to $145 billion by 2026.
Despite these losses in Reality Labs, Meta posted a net income of $26.8 billion in Q1 2023, a 61% increase from the previous year, alongside a 33% rise in revenue to $56.3 billion. This financial performance underscores a substantial pivot toward AI amid competition from firms like OpenAI and Anthropic.
“We are increasing our infrastructure capex forecast for this year,” Meta CEO Mark Zuckerberg said during the earnings call. “Most of that is due to higher component costs, particularly memory pricing. We are very focused on increasing the efficiency of our investments.”
Meta’s past investments in metaverse technologies have not attracted significant interest or success, prompting a reassessment of its financial strategy. Last year, the company hired over 50 AI researchers and engineers from rival firms, contributing to the launch of its updated AI model, Muse Spark, earlier this month. While Zuckerberg reported an increase in AI usage, costs related to its development remain high.
A question from an investor about Meta’s capital expenditures in 2027 received no specific guidance. “We aren’t providing a specific outlook for 2027 capex, and we are, frankly, undergoing a very dynamic planning process ourselves as we’re working through what our capacity needs will be over the coming years,” said Meta CFO Susan Li. “Our experience so far has been that we have continued to underestimate our compute needs.”
The mixed signals from the earnings report led to a decline in Meta’s stock, which fell more than 5% in after-hours trading.
