Reality Labs, the part of Meta that specializes in virtual reality (VR) and the metaverse, has seen its eighth consecutive quarter of losses, but CEO Mark Zuckerberg is unwavering in his commitment to investing in the field, which he refers to as a “huge potential.”
Zuckerberg stated on Meta’s Q2 earnings call on Wednesday that such losses would persist for a number of years before VR applications and its metaverse platform are developed enough to take advantage of the “massive opportunity” worth “hundreds of billions of dollars”:
“The Metaverse is a massive opportunity for a number of reasons. I feel even more strongly now that developing these platforms will unlock hundreds of billions of dollars, if not, trillions over time. This is obviously a very expensive undertaking over the next several years. I’m confident that we’re going to be glad that we played an important role in building this.”
In Meta’s Q2 financial announcement earlier in the day, it was made clear that Reality Labs had been experiencing a prolonged period of operational losses. For divisions in the research and development stage, such losses are common.
In order to integrate Meta users using its numerous social platforms, such as the Metaverse, with the Oculus range of VR headsets, Reality Labs creates VR and augmented reality (AR) applications.
In addition to the losses, Reality Lab’s revenue and operating margin have also been heading downward since 2021 and 2020, respectively. The Q2 2022 sales of $11.1 billion and the margin of 29% reported were the lowest in the previous seven quarters.
Reality Labs reported Q1 losses of $2.9 billion.
A “challenging macro environment,” according to Zuckerberg, may be making the losses worse.
He claimed that the current state of the economy is worse than it was a quarter ago, and his assertion is supported by the fact that the Federal Reserve increased interest rates on Wednesday, just before the company’s earnings call, by 0.75 percentage points for the second time in a row. He continued:
“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business. In this environment, we’re focused on making a long-term investment that will position us to come out stronger.”
Despite the financial difficulties, Zuckerberg is optimistic that his business will emerge from the present recession as “a stronger and more disciplined organization.”