Meta’s Metaverse Lab: $40B Loss after Facebook’s Name Change

After rebranding to Meta in September 2021, it was clear that CEO Mark Zuckerberg was fully committed to shifting Facebook from web2 social media to the metaverse. Now, three years later, we can assess the financial commitment of the company and the impact of its expansion into virtual and augmented reality (VR and AR) on Meta’s financial performance before its upcoming first quarter earnings call on April 24. Meta reported a revenue of $134.90 billion in 2023, a nearly 16% increase over the previous year. Its fourth quarter revenue of $40.1 billion set a company record and surpassed analysts’ expectations. This suggests that the transition to the metaverse has been successful for Meta, although there are mixed signals to consider.

Although Facebook is thriving as a social media platform, Meta’s Reality Labs, responsible for products like the Quest VR headset line, has generated consistent operating losses since 2021, totaling around $40 billion. Meta’s revenue has mainly come from its suite of social media and messaging apps like Facebook, Instagram, Messenger, and WhatsApp. According to a report from UploadVR, Meta has sold approximately 20 million Quest headsets since 2019, as of March 2023. To put it in perspective, Apple sold around 151 million iPhones in 2023 alone, while Sony sold approximately 50 million PlayStation 5 consoles since 2020 as of December 2023.

Surprisingly, these figures surrounding Reality Labs have not deterred investors and shareholders. In fact, Meta has been actively buying back its own stock while investing in Reality Labs for metaverse research and development, as highlighted by The Motley Fool. Since 2021, Meta has repurchased $92 billion worth of its own shares. At the end of 2023, the company had $31 billion available for further stock purchases, and an additional $50 billion set aside for future buybacks in February.

This demonstrates the confidence of investors in Meta’s overarching strategy and willingness to invest in the future of the metaverse. Despite the losses in Reality Labs, Meta has been able to finance its initiatives and generate substantial revenue from its social media platforms. The buybacks of its own stock indicate that Meta sees long-term potential in the metaverse and is committed to strengthening its position in the market.

As Meta prepares for its first quarter earnings call, it will be interesting to see how the financial numbers further reflect the company’s metaverse shift. The success of Meta’s social media platforms combined with the investments in AR and VR technology may have positioned the company for future growth and profitability. The overall impact of the metaverse on Meta’s bottom line is yet to be fully determined. Investors and analysts will scrutinize the upcoming earnings report to gauge the effectiveness of Meta’s transition and its potential for sustained success in the evolving digital landscape.