Meta Reality Labs Earnings Reveal a Less Successful Holiday Season & Highest Operating Costs Yet

Meta today revealed its latest quarterly earnings results, showing that Reality Labs, the company’s XR and metaverse arm, had a smaller holiday season than the last, while operating costs have reached their highest levels yet.

Today during the company’s Q4 earnings call, Meta revealed the latest revenue and operating cost figures for its XR and metaverse division, Reality Labs, providing one of the clearest indicators of the success the company is seeing in this space.

The fourth quarter has consistently been the best performer for Reality Labs, no doubt thanks to the holiday season driving sales of the company’s offerings.

In the fourth quarter of 2022, Reality Labs saw $727 million in revenue, which was 17% less compared to the fourth quarter of 2021 when the division pulled in $877 million in revenue.

The fourth quarter of 2021 was a good performer for Reality Labs revenue thanks to the success of Quest 2 which had launched earlier that year.

In the fourth quarter of 2022, the company’s latest headset to launch was Quest Pro, it’s high-end MR headset. Unsurprisingly, the more expensive device—which has yet to find a strong value proposition at $1,500—doesn’t seem to have performed as well as Quest 2 did in its launch year. Just days ago, Meta temporarily discounted the price of the headset to $1,100, appearing to test the waters at that lower price. Granted, XR headsets aren’t the only product Reality Labs offers, which means the division’s other product lines—video calling speakers and smart glasses—may have had a role to play.

In addition to a smaller holiday season than last year, the latest earnings for Reality Labs show the division’s expenses were greater than in any previous quarter, surpassing $5 billion for the first time.

This continues a trend of Meta’s ever-growing investments in Reality Labs which the company has warned investors may not flourish until the 2030s.

In the face of operating costs far outpacing revenue, Meta CEO Mark Zuckerberg told investors that his management theme for 2023 was “efficiency,” saying he wants to focus the company on streamlining its structure to move faster while being more aggressive about shutting down projects that aren’t performing.

Update (February 2nd, 2023): A prior version of this article transposed ‘operating loss’ figures in place of ‘operating cost’. The figures have been updated for greater accuracy, though the overall story remains the same.