Meta’s Reality Labs revenue grew 35% year-on-year in Q1 2022 – but costs grew 55%.
Reality Labs is the division of Meta responsible for Quest VR hardware & software, Portal video calling appliances, and the Ray-Ban Stories camera glasses – as well as researching and developing AR glasses and other future AR and VR devices.
The division brought in $695 million revenue in Q1 2022, up from $534 million in Q1 2021. But the cost of this division was a whopping $3.7 billion, up from $2.4 billion in Q1 2021. The result is a loss of $3 billion, up from a loss of $1.8 billion in Q1 2021.
Meta’s CFO said the Reality Labs revenue growth was “driven by Quest 2 sales”. While costs are growing significantly, revenue is clearly growing too – Quest 2’s success shows no signs of slowing down:
This increase in costs isn’t unexpected however – Mark Zuckerberg warned investors in October that investments in AR & VR would reduce Meta’s overall 2021 profit by $10 billion, and said “I expect this investment to grow even further for each of the next several years”. Meta’s CFO explained the Q1 cost increases as “driven by employee-related costs, R&D operating expenses and cost of goods sold”.
Zuckerberg today signalled to investors he’s still prepared to spend tens of billions of dollars over this decade “laying the groundwork for what I expect to be a very exciting 2030’s when this is established as the primary computing platform”, saying he’s even prepared to “trade off against shorter term financial goals” if it comes down to that. This could turn out to be the largest bet in the history of the tech industry – but will it work?