Meta lost $13.7 billion on Reality Labs in 2022 as Zuckerberg’s metaverse bet gets pricier

Mark Zuckerberg’s dream of a future within the metaverse is costing traders a boatload of cash.

In its earnings report after the bell on Wednesday, Meta mentioned its Reality Labs division, house to the corporate’s digital actuality applied sciences and initiatives, posted a $4.28 billion working loss within the fourth quarter, bringing its complete for 2022 to $13.72 billion.

It was a tricky first full yr for the brand new Meta, the corporate previously generally known as Facebook. In late 2021, Zuckerberg modified the corporate’s identify and mentioned its future could be within the metaverse, a digital universe the place individuals will work, store, play and study.

But for now, it is only a value middle, and Meta continues to be an internet advert firm.

Reality Labs generated $727 million within the fourth quarter, and $2.16 billion in income for all of 2022 — a decline from $2.27 billion in 2021 — together with gross sales of Quest headsets. In different phrases, the division misplaced greater than six instances the sum of money it generated in income final yr, whereas accounting for lower than 2% of complete gross sales at Meta.

Analysts had been anticipating Reality Labs to document an quarterly working lack of $4.36 billion on income of $715.1 million, in accordance with StreetAccount.

Sales of VR headsets within the U.S. declined 2% in 2022 from the prior yr as of early December, in accordance with knowledge shared with CNBC by analysis agency NPD Group.

In July, Meta introduced it was elevating the value of its Quest 2 VR headset by $100. The firm mentioned on the time that the value hike was essential to account for inflationary pressures. Meta then debuted its dearer Quest Pro VR headset in October, pitching it to corporations as an enterprise-workplace machine for $1,500. This week, Meta is operating a sale on its high-end VR headset, shaving off $400 for a restricted time.

Zuckerberg advised CNBC’s Jim Cramer final summer season that he hopes to “get to around a billion people in the metaverse doing hundreds of dollars of commerce” by the second half of the last decade.

But earlier than the Facebook founder’s desires grow to be a actuality, Meta has to spend many billions of {dollars} growing the VR and augmented-reality applied sciences that underpin the metaverse idea.

The firm mentioned final yr that it expects “Reality Labs operating losses in 2023 will grow significantly year-over-year.”

“Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run,” Meta mentioned on the time.

Shareholders have been lower than thrilled with the outcomes up to now. Meta misplaced virtually two-thirds of its worth final yr as metaverse prices soared and the corporate’s core on-line advert business suffered from a struggling economic system, elevated competitors from TikTok and Apple’s privateness replace, limiting advert concentrating on.

The firm on Wednesday reported fourth-quarter outcomes that beat analysts’ income estimates and introduced a $40 billion buyback, sending the refill greater than 17% in prolonged buying and selling.

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