Meta subsidiary Reality Labs, which focuses on the development of the metaverse, recorded a significant operating loss of over $4.6 billion in the fourth quarter of 2023.

In its fourth-quarter report, released on February 1, Meta revealed that Reality Labs reported a loss of $4.65 billion during Q4, while generating nearly $1.1 billion in revenue.

This operating loss marks the largest quarterly loss for Reality Labs since Meta began including the division’s financials in its reporting during the fourth quarter of 2020.

In 2023, Reality Labs’ total revenues amounted to just under $1.9 billion, with more than half of the annual revenue generated in the fourth quarter, primarily driven by the release of the Meta Quest 3.

The total operating loss for 2023 reached $16.1 billion, representing a 17.5% year-on-year increase from 2022.

VR Sales Attributed to Strong Reality Labs Performance

During an earnings call, Meta founder and CEO Mark Zuckerberg attributed the revenue performance of Reality Labs to a “strong holiday season” for their Quest line of virtual reality (VR) headsets.

He also expressed confidence in the success of their newly released Quest 3, stating that it had a “strong start.”

Zuckerberg emphasized that artificial intelligence (AI) and the metaverse were integral to Meta’s long-term vision, and the company would continue to make significant investments in these areas.

Today, Mark Zuckerberg gave a masterclass on Meta’a AI Strategy at their latest earnings call. They took some time to wake up but they’re going ALL IN.  https://t.co/w940nqSGkv pic.twitter.com/XWKHRVO14t

— José Pedro Almeida (@jpedroalmeida_) February 2, 2024

Zuckerberg further highlighted the rapid advancements in the field of AI and expressed his expectation that the next generation of augmented reality (AR), VR, and mixed reality (MR) platforms would provide a realistic sense of presence, serving as the foundation for future social experiences.

“These days, there are a lot of questions about AI that I get, and that field is moving very quickly,” Zuckerberg said.

“I still expect that this next generation of AR VR and [mixed reality] computing platforms to deliver a realistic sense of presence that will be the foundation for the future of social experiences.”

Reality Labs Loss to Increase YoY

Meta Chief Financial Officer Susan Li acknowledged that they anticipate Reality Labs’ losses to increase significantly year-over-year due to ongoing investments in AR and VR product development, as well as efforts to scale their ecosystem.

Despite the operating loss in Reality Labs, Meta’s overall performance in 2023 was impressive.

The tech giant reported a full-year revenue of $134.9 billion, surpassing estimates from Wall Street research house Zacks and representing a 16% increase from the previous year.

Additionally, Meta announced its intention to issue its first-ever dividend of 50 cents per share on March 26.

The metaverse has been a topic of intense debate in the tech world, with some industry leaders like Bill Gates expressing a tepid outlook.

The gloomy outlook regarding the metaverse is not entirely out of the norm, particularly since many big supporters of the idea have recently backed down from their ambitions.

For one, entertainment giant Disney announced last year that it is eliminating its metaverse division as part of broader layoffs that will impact as many as 7,000 employees.

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