Mark Zuckerberg, chief executive officer of Meta Platforms Inc., demonstrates the Meta Quest Pro during the virtual Meta Connect event in New York, US, on Tuesday, Oct. 11, 2022.
Michael Nagle | Bloomberg | Getty Images
It was a tough first full year for the new Meta, the company formerly known as Facebook. In late 2021, Zuckerberg changed the company’s name and said its future would be in the metaverse, a digital universe where people will work, shop, play and learn.
But for now, it’s just a cost center, and Meta is still an online ad company.
Reality Labs generated $727 million in the fourth quarter, and $2.16 billion in revenue for all of 2022 — a decline from $2.27 billion in 2021 — including sales of Quest headsets. In other words, the division lost more than six times the amount of money it generated in revenue last year, while accounting for less than 2% of total sales at Meta.
Analysts were expecting Reality Labs to record an quarterly operating loss of $4.36 billion on revenue of $715.1 million, according to StreetAccount.
Sales of VR headsets in the U.S. declined 2% in 2022 from the prior year as of early December, according to data shared with CNBC by research firm NPD Group.
In July, Meta announced it was raising the price of its Quest 2 VR headset by $100. The company said at the time that the price hike was necessary to account for inflationary pressures. Meta then debuted its more expensive Quest Pro VR headset in October, pitching it to companies as an enterprise-workplace device for $1,500. This week, Meta is running a sale on its high-end VR headset, shaving off $400 for a limited time.
Zuckerberg told CNBC’s Jim Cramer last summer 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 decade.
But before the Facebook founder’s dreams become a reality, Meta has to spend many billions of dollars developing the VR and augmented-reality technologies that underpin the metaverse concept.
The company said last year 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 said at the time.
Shareholders have been less than thrilled with the results so far. Meta lost almost two-thirds of its value last year as metaverse costs soared and the company’s core online ad business suffered from a struggling economy, increased competition from TikTok and Apple’s privacy update, limiting ad targeting.
The company on Wednesday reported fourth-quarter results that beat analysts’ revenue estimates and announced a $40 billion buyback, sending the stock up more than 17% in extended trading.
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