Meta’s Facebook Reality Labs Loses Nearly $3 Billion in Q1

A smartphone with the Meta logo in a photo illustration taken on Oct. 28, 2021. (Dado Ruvic/Reuters)

Facebook parent company Meta Platforms Inc. posted nearly $3 billion in losses in the first three months of 2022 for its Metaverse-focused Reality Labs division.

According to an earnings report (pdf) published on April 27, the company’s Facebook Reality Labs (FRL) division, which houses its augmented and virtual reality operations, had $695 million in revenue in the first quarter, driven by sales of its Quest 2 virtual reality headset.

That beat Wall Street’s expectations of $683 million.

However, the FRL division posted a loss of $2.9 billion for the first quarter, an increase of more than 61 percent from its $1.8 billion loss in the first quarter of 2021.

During the April 27 earnings call, Meta CEO Mark Zuckerberg said losses in this division were to be expected, given that the company is investing heavily in the development and research of various products related to the division, such as its Project Cambria virtual reality headset and other products yet to be released.

“In Reality Labs, we’re making large investments to deliver the next platform that I believe will be incredibly important both for our mission and business, comparable in value to the leading mobile platforms today,” Zuckerberg said.

“I recognize that it’s expensive to build this, it’s something that’s never been built before and it’s a new paradigm for computing and social connection.”

Meta previously said in its third-quarter 2021 results that it anticipated FRL would reduce the company’s overall operating profit in 2021 by approximately $10 billion, but that the company is “committed to bringing this long-term vision to life” and expects to increase its investments in the division.

“So over the next several years, our goal from a financial perspective is to generate sufficient operating income growth from Family of Apps to fund the growth of investment in Reality Labs while still growing our overall profitability,” Zuckerberg said.

“Unfortunately, that’s not going to happen in 2022 given the revenue headwinds, but longer term that is our goal and our expectation.”

Elsewhere in the latest earnings report, the company reported overall revenue for the first quarter of 2022 as $27.9 billion, up 6.9 percent from $26.1 billion in the first quarter of 2021.

The company’s current adjusted quarterly earnings per share of $2.72 also surpassed analysts’ predictions of $2.56.

Facebook’s number of daily active users was 1.96 billion on average for the month of March 2022, an increase of 4 percent year-over-year.

Facebook announced in October 2021 that it was officially changing its name to Meta following a string of leaks and whistleblower complaints about its companywide practices.

Meta’s stock price was down 3.32 percent at $174.95 on April 28 as of 10:33 a.m. UTC (6:33 a.m. Eastern time).

Zuckerberg noted during the April 27 earnings call that the company is focused primarily on “laying the groundwork for what I expect to be a very exciting 2030s.”