Reality Labs, the part of Meta that specializes in virtual reality (VR) and the metaverse, has reported losses for the seventh consecutive quarter.
Despite that, CEO Mark Zuckerberg is unwavering in his commitment to investing in the space, which he refers to as a “massive opportunity.”
Losses Are Inevitable During the Development Phase
Reality Labs works on building VR and augmented reality (AR) solutions across Meta’s social platforms. The company’s results for Q2 were presented during a call on July 27. During the meeting, Zuckerberg noted that losses are not unusual, as the project is in the research and development phase.
He believes the losses will persist for several years before the VR applications and Metaverse platform will develop enough.
"The Metaverse is a massive opportunity for a number of reasons. I feel even more strongly now that developing these platforms will unlock hundreds of billions of dollars, if not trillions over time," said Zuckerberg.
In addition to the losses, Reality Lab’s revenue and operating margin have also been heading downward since 2021 and 2020, respectively. The Q2 2022 sales of $11.1 billion and the margin of 29% reported were the lowest in the previous seven quarters.
Losses Influenced by “Challenging Macro Environment”
A “challenging macro environment,” according to Zuckerberg, may be making the losses worse. He claimed that the current state of the economy is more threatening than it was a quarter ago, and his assertion is supported by the fact that the Federal Reserve increased interest rates on July 27 by 0.75 percentage points for the second time in a row.
"We seem to have entered an economic downturn that will have a broad impact on the digital advertising business. In this environment, we're focused on making a long-term investment that will position us to come out stronger," added the CEO.
Confident about the Future
Despite the financial difficulties, Zuckerberg is optimistic that his business will emerge from the present recession as “a stronger and more disciplined organization.”
He assured that the investments his business is making right now guarantee that Meta will continue being a leader in a sector.
"This is obviously a very expensive undertaking over the next several years," Zuckerberg added, "I'm confident that we're going to be glad that we played an important role in building this."
On the Flipside
- The Federal Trade Commission (FTC) has filed a lawsuit against Meta, alleging that the firm aims to monopolize the entire Metaverse market.
- The company’s predatory moves might negatively influence innovation and competitiveness in the metaverse sector.
- Ongoing user data and privacy debates cast a shadow on Meta’s ability to provide a safe Metaverse environment for its users.
More about Meta’s results on Q1:
Metaverses to check in 2022: