Meta’s second-quarter earnings report revealed that its subsidiary, Reality Labs, which focuses on virtual and augmented reality development, has incurred a substantial loss of $21.3 billion since the beginning of 2022. Executives expressed concern that the situation will worsen in the future. In Q2, Reality Labs generated $276 million in sales, a decrease from the $339 million recorded in Q1. This decline highlights the limited penetration of VR and AR technology in the mainstream market. The losses exceeded analyst expectations, although CFO Susan Li indicated that Meta will continue investing in the technology to support the development of the metaverse. Li explained that the augmented reality/virtual reality product development efforts and ecosystem expansion will contribute to significant year-over-year operating losses for Reality Labs. Despite this, Meta recently unveiled its Quest 3 headset at a price of $499, claiming it to be the first mainstream headset with high-res color mixed reality. However, the success of the technology remains unclear. As Li mentioned, Reality Labs consistently faces operating losses, including $3.7 billion in the previous quarter. In total, Meta has endured operating costs of $13.7 billion in 2022. Nevertheless, the recent earnings report revealed a 11% year-over-year increase in Meta’s overall quarterly revenue, reaching $32 billion. The announcement led to a surge in Meta’s shares, rising by over 6% in after-hours trading on Wednesday, and a subsequent nearly 9% increase in pre-market trading on Thursday, with Meta’s share price reaching $325.25. Li stated that Meta anticipates maintaining its revenue in Q3, with projections ranging between $32 billion and $34.5 billion. Furthermore, the company expects to exceed its expense forecasts for the year. In the report, Li stated that Meta’s full-year 2023 expenses are expected to be in the $88-91 billion range due to legal-related expenses incurred during Q2. The Washington Post has reached out to Meta for comment. Earlier this month, Meta faced a copyright infringement lawsuit from stand-up comic Sarah Silverman and authors Christopher Golden and Richard Kadrey. They alleged that Meta’s language models, developed through artificial intelligence, were trained on illicitly acquired datasets containing their works. The lawsuit points to the allegedly illegal websites used to train LLaMA, a competitor to ChatGPT launched by Meta in February. In addition to the losses associated with virtual reality investments, Meta’s Threads platform has also faced legal challenges. Elon Musk has threatened to sue Meta over the platform, which initially gained popularity but failed to live up to Zuckerberg’s ambition of becoming a “Twitter killer.” A letter from Alex Spiro, Twitter’s lawyer, addressed to Meta’s CEO, mentioned that Meta hired former Twitter employees who have access to the social media company’s trade secrets and confidential information. Spiro demanded that Meta cease using any of Twitter’s trade secrets or confidential information and emphasized Twitter’s intention to protect its intellectual property rights. In response, Meta spokesperson Andy Stone used a Threads post to deny the claim, stating that no former Twitter employees work on the Threads engineering team.
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