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Meta's AR/VR Revenue & Losses Poised For Growth After Quest 3 Launch

Meta's AR/VR Revenue & Losses Poised For Growth After Quest 3 Launch

Meta's Reality Labs revenue is down-on-year when compared to the same periods in 2022.

Reality Labs is the division at Meta that handles all VR/AR projects, including Quest hardware and software, alongside other research and in-development projects involving future AR/VR devices. The division also handles products like the company's Portal video calling devices and Ray-Ban Stories glasses.

In Meta's latest earnings report, the company announced that the Reality Labs division brought in $276 million in revenue in Q2 2023, which is down 39% year-on-year when compared to the same period of 2022. The division's loss from operations came in at $3.74 billion in Q2 2023, which is up 33% year-on-year compared to the same period of 2022. This means that, as expected, the operating losses for Reality Labs continue to climb and significantly outweigh the division's revenue year-on-year.

Meta's earnings report states that the company expects Reality Labs operating losses to "increase meaningfully" again in 2024, "due to [its] ongoing product development efforts in augmented reality/virtual reality and investments to further scale [its] ecosystem."

Despite the clear year-on-year drop in Reality Labs revenue, Quest 2 is nearing the end of its lifecycle. In Q4 2022, Meta said Reality Labs revenue was down due to "lower Quest 2 sales" – and that was before Meta had even announced Quest 3. Meta revealed Quest 3 at the beginning of June and that likely affected Quest 2 sales.

The schedule of Quest 2 game releases has also been fairly slow this year and is likely drying up on purpose. Meta, developers and publishers are likely holding onto the year's biggest releases, with the aim of launching them alongside Quest 3, or shortly after, during the end-of-year holiday push. For existing Quest 2 owners, there's not been a whole lot of exciting new content to spend money on.

In the report this week Meta CEO Mark Zuckerberg cited the upcoming Quest 3 launch as part of the company's "most exciting roadmap ... in a while."

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