Meta Experiences Record Quarter in 2021 Despite Increased Losses in Metaverse

Despite incurring significant losses in the metaverse, Meta has recently achieved its most successful quarter since 2021. Surprisingly, the company anticipates even greater financial losses in the upcoming year.

Reality Labs, the Meta division that oversees its virtual and augmented reality projects, lost $3.7 billion in the second quarter of 2023 and generated just $276 million in revenue, according to the company’s latest earnings report. And the company said once again that it expects its metaverse spending to accelerate. CFO Susan Li said Meta expects Reality Labs’ losses to “grow meaningfully” compared to last year, when it lost more than $13 billion on its efforts.

Meta CEO Mark Zuckerberg tried to downplay the significance of the losses. “We remain fully committed to the metaversal vision,” he said during the company’s earnings call. When asked for details on the company’s metaverse spending, he pointed to the upcoming Quest 3 headset, which he said he will launch at Meta’s Connect in September. “This is the biggest headset we’ve released since 2020,” he said. “There’s just a lot of expense involved in bringing it to market.”

Excluding the metaverse, it was an otherwise strong quarter for Metal, with revenue of $32 billion, up 11 percent from last year. Zuckerberg touted Reels, which now garner 200 billion views a day on Facebook and Instagram, as the company reinvests in AI-powered recommendations. He also highlighted the recent launch of Threads and the company’s Llama 2 large-language model.

While early analytics data has shown Threads’ engagement has dropped significantly since its launch, Zuckerberg said the company is “seeing more people coming back every day than I expected” and that he sees a path for the app to eventually reach “hundreds of millions” of users.

Meta also confirmed that most of its layoffs, which saw the company lose more than 20,000 jobs since last fall, have been “substantially completed.” Zuckerberg previously called 2023 Meta’s “year of efficiency” as he cut staff and tried to streamline the company’s management structure. Zuckerberg pointed to the launch of Threads, which he said was overseen by a relatively small team, as evidence that “cultural changes” at Meta are working.

However, Zuckerberg did not offer a timeline for when he thinks the company’s metaversal spending could begin to pay off. “This is a very long-term bet,” he said. “You know, on a deep level, I understand the discomfort that a lot of investors feel about that. And look, I mean, I can’t guarantee that I’m right about this bet — I think this is the direction the world is going.”