Reality Labs

Meta CEO Zuckerberg steadfast on metaverse plans despite $13.7B setback

During a Q4 earnings call, Mark Zuckerberg said he saw no reason to deviate from the company’s long-term metaverse strategy.

Meta founder and CEO Mark Zuckerberg says the company has no plans to change its long-term strategy for the metaverse, despite operating losses for its Reality Labs business peaking in 2022.

Meta on Feb. 1 released earnings showing that Reality Labs lost $13.7 billion in 2022 — the largest ever yearly losses recorded for its metaverse-building division.

The fourth quarter was particularly costly, with the division losing nearly $4.3 billion, which was also the largest quarterly loss within the department since financials for the business were first published.

On a Feb. 1 earnings call, Zuckerberg was steadfast in the company’s metaverse strategy. Answering a question about how the firm’s efficiency applies to Reality Labs, he answered:

“None of the signals that I’ve seen so far suggest that we should shift the Reality Labs strategy long term.”

He added that later in 2023 the company would launch another “next generation consumer headset” following the October launch of its Quest Pro Virtual Reality (VR) headset.

*The Meta Quest Pro is the tech firm’s latest, and most expensive, VR headset offering. Source: Meta*

Meta’s chief financial officer, Susan Li, similarly doubled down on the Reality Labs business, echoing Zuckerberg’s statement from a Q3 earnings call that losses in the business would increase in 2023.

“We still expect our full-year Reality Labs losses to increase in 2023, and we’re gonna continue to invest meaningfully in this area given the significant long-term opportunities that we see.”

Meta’s overall revenue for the fourth quarter was $32.1 billion, beating Wall Street expectations.

The better-than-expected revenue figures caused Meta’s stock price to jump after the bell, gaining nearly 19.5% in after-hours trading at the time of writing, according to Yahoo Finance.

Meta reportedly plans ‘large-scale layoffs,’ but what of its metaverse division?

As of the end of September, Meta had more than 87,000 employees — a large proportion of which is said to work in the Reality Labs division.

Social media and tech giant Meta is reportedly gearing up for “large-scale layoffs” this week amid rising costs and a recent collapse of its share price.

According to Wall Street Journal (WSJ) report on Nov. 6 citing people familiar with the matter, the planned layoffs could impact thousands of employees in a broad range of divisions across Meta’s 87,000-strong workforce.

It is not currently understood whether the firm’s Reality Labs division, which registered a $3.7 billion loss in the third quarter, would see staff cuts.

Last week, Meta CEO Mark Zuckerberg said that the company would be focusing its investment on “a small number of high-priority growth areas,” including its Artificial Intelligence (AI) Discovery Engine and its advertisement and business messaging platforms in addition to the Metaverse, stating:

“So that means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year […] In aggregate, we expect to end 2023 as either roughly the same size, or even a slightly smaller organization than we are today.”

During the earnings call, the billionaire entrepreneur appeared to double down on the firm’s investments in these areas, saying he believes they’re “on the right track with these investments” and should “keep investing heavily in these areas.”

The report comes only a week after Meta reported its third-quarter earnings, which missed revenue expectations and saw a rise in its operating costs. Its stock price also took a battering, with shares in Meta currently priced at $90.79 — down 7.56% over the last five days and 73.19% year-on-year, according to Yahoo Finance.

The company appears to still be actively hiring into its metaverse division regardless, with its list of job openings revealing 38 of its 413 listings are related to Augmented Reality and Virtual Reality.

Cointelegraph has reached out to Meta for clarification and whether there would be any changes to its metaverse division but did not receive an immediate response.

Meta reportedly plans ‘large-scale layoffs,’ but what of its metaverse division?

As of the end of September, Meta had more than 87,000 employees — a large proportion of which is said to work in the Reality Labs division.

Social media and tech giant Meta is reportedly gearing up for “large-scale layoffs” this week amid rising costs and a recent collapse of its share price.

It is not currently understood whether the firm’s Reality Labs division, which registered a $3.7 billion loss in the third quarter, would see staff cuts.

Last week, Meta CEO Mark Zuckerberg said that the company would be focusing its investment on “a small number of high-priority growth areas,” including its artificial intelligence (AI) Discovery Engine and its advertisement and business messaging platforms in addition to the metaverse, stating:

“So that means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year […] In aggregate, we expect to end 2023 as either roughly the same size, or even a slightly smaller organization than we are today.”

The company appears to still be actively hiring into its metaverse division regardless, with its list of job openings revealing 38 of its 413 listings are related to augmented reality and virtual reality.

Cointelegraph has reached out to Meta for clarification and whether there would be any changes to its metaverse division but did not receive an immediate response.

Metaverse losses top $3.6B for Meta with spending set to increase

The tech giant is just over $500 million away from topping its more than $10 billion metaverse department losses in 2021, but it said its spending will only grow next year.

Big Five technology player Meta is still burning cash through its metaverse research and development arm Reality Labs with a $3.67 billion loss posted for the third quarter of 2022, stating those losses will further deepen next year.

The company’s Q3 2022 earnings released on Oct. 26 show the biggest-ever quarterly losses for Reality Labs from earnings dating back to the fourth quarter of 2020, the business also made $285 million in revenue for the third quarter, its lowest on record within that time.

With its Reality Labs business marking its third straight quarterly loss totaling $9.44 billion so far in 2022, Meta is shaping up to beat its 2021 losses on its metaverse play which saw just over $10 billion in losses last year.

Those year-on-year losses are set to deepen as Meta chief financial officer Dave Whener stated in the earnings:

“We do anticipate that 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.”

On Meta’s earnings call, CEO Mark Zuckerberg continued to be unfazed by the company’s big investment in what he called the “next computing platform.” He said it was the firm’s top priority and told investors that building a metaverse and its related hardware is “a massive undertaking.”

“It’s often going to take a few versions of each product before they become mainstream,” he added. “I think that our work here is going to be of historical importance and create the foundation for an entirely new way that we will interact with each other and blend technology into our lives as well as the foundation for the long term of our business.”

Overall the company slightly exceeded its revenue expectations from Wall Street analysts, bringing in $27.71 billion in revenue for the quarter but bought in $1.64 earnings per share, missing its estimate of $1.88 per share.

Meta’s stock price has fallen over 19.5% in after-hours trading at the time of writing, according to Yahoo Finance, with the company’s shares down over 61.5% since the start of 2022.

Meta’s big bet on its virtual world has some investors urging the firm to scale back its investment, with Brad Gerstner, founder of technology investment firm Altimeter Capital and Meta shareholder penning an open letter to Zuckerberg and the board of directors.

Gerstner said its “investment in an unknown future is super-sized and terrifying” and that it could take a decade for its metaverse to start making a profit, he said the firm should focus on an artificial intelligence offering as it has the potential to better the company’s results.

Some are not optimistic about the future of the metaverse in the hands of Zuckerber. Meta whistleblower Frances Haugen, in April, said its virtual world will repeat “all the harms of Facebook” if the company doesn’t commit to transparency.

Zuckerberg unfazed about $2.8B metaverse division loss in Q2

“This is obviously a very expensive undertaking over the next several years,” said Mark Zuckerberg.

Meta’s virtual reality (VR) and metaverse division Reality Labs has posted its seventh straight quarter of losses, but CEO Mark Zuckerberg remains steadfast in investing in the technology, which he calls a “massive opportunity.”

During Meta’s Q2 earnings call on Wednesday, Zuckerberg acknowledged that such losses could continue for several more years until VR applications and its metaverse platform are mature enough to tap into 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,” Zuckerberg added, “I’m confident that we’re going to be glad that we played an important role in building this.”

The extended stretch of operating losses for Reality Labs was revealed in Meta’s Q2 earnings report earlier in the day. Such losses are not unusual for divisions in a research and development phase.

Reality Labs builds VR and augmented reality (AR) applications to help Meta users connect over its various social platforms, including the Metaverse, with the Oculus line of VR headsets.

In addition to the losses, Reality Lab’s revenue has been trending down since 2021 and its operating margin has been trending down since 2020. The $11.1 billion in revenue and 29% margin posted in Q2 2022 are the lowest over the past seven quarters.

Reality Labs posted $2.9 billion in losses for Q1.

Zuckerberg also noted that a “challenging macro environment” could be exacerbating the losses.

He said that the economic situation now is worse than it was a quarter ago, and his opinion is corroborated by the fact that the Federal Reserve raised interest rates by 0.75 percentage points for the second time in a row on Wednesday before the Meta earnings call took place, adding:

“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 economic troubles, Zuckerberg is confident that his company and its subsidiaries will come out of the current economic downturn as “a stronger and more disciplined organization.”

He attributed this confidence to the investments his company is making now to ensure it is able to remain a leader in an industry that may be undergoing a shift to accommodate more metaverse platforms.

Meanwhile, the United States Federal Trade Commission (FTC) has filed a lawsuit against Meta, alleging that the firm is aiming to monopolize the entire Metaverse market. The complaint states that Meta’s moves within the space hinder innovation and “competitive rivalry” among U.S.-based companies looking to build Metaverse platforms and applications.