Meta and its CEO Mark Zuckerberg might be bullish on the metaverse, but their pivot into virtual reality has so far weighed heavily on its balance sheet.
Meta reported a second-quarter loss of $2.8 billion in its Reality Labs division on Wednesday, adding to a $2.9 billion loss in this year’s first quarter.
Indeed, Reality Labs has lost $5.7 billion for Meta this year. And last year, it posted an annual loss of $10.2 billion, bringing combined losses to almost $16 billion.
The division, which is in charge of producing metaverse-related technology such as virtual reality (VR) hardware and software, posted quarterly sales of $452 million. That’s a nearly 35% drop from the second quarter.
Facebook changed its name to Meta in October last year to capitalize on the anticipated metaverse trend. Zuckerberg remains positive about the long-term outlook.
In the company’s earnings call Wednesday, he said artificial intelligence is the key driver of Meta’s business moving forward, followed by the emergence of the metaverse. According to him, the segment is still a solid opportunity as it enables “deeper” social experiences irrespective of where people are and expects the sector to unlock “trillions of dollars” over time.
“This is obviously a very expensive undertaking over the next several years,” Zuckerberg said. “But as the metaverse becomes more important in every part of how we live from our social platforms and entertainment to work and education and commerce, I’m confident that we’re going to be glad that we played an important role in building this.”
Meta revenues disappoint but daily active users beat expectations
Meta’s total revenue for the quarter dropped 1% to $28.8 billion, missing expectations of $28.9 billion.
This was reportedly its first-ever quarterly revenue decline in the 18 years since the tech titan’s inception. The company cited recessionary fears and competition weighing on its digital ad sales as reasons why.
After disclosing second quarter results, Meta’s stock fell 4.6% in after-hours trading to $161.70 a share on Wednesday, and shed another 1% in pre-market trading Thursday. Its stock is down 52% in the year-to-date, per TradingView data.
Meta expects third-quarter revenue from its Reality Labs segment to be even lower than the second quarter.