Meta continues to burn cash on AR/VR
▼ Summary
– Meta lost $4 billion on Reality Labs in its latest quarter, averaging $83.5 billion in total losses over 21 quarters since 2021.
– Meta’s spending on AI will exceed its metaverse investments, with projected 2026 capital expenditures of $125–145 billion.
– Meta’s Q1 2024 net income rose 61% to $26.8 billion, and revenue increased 33% to $56.3 billion year-over-year.
– Meta hired over 50 AI researchers from competitors and released its AI model Muse Spark, but costs for building AI products continue to rise.
– Meta’s stock dropped over 5% in after-hours trading, partly due to investor concern over unclear 2027 capex outlook and underestimated compute needs.
When Meta released its quarterly earnings report on Wednesday evening, a colleague pointed out how the company lost $4 billion on Reality Labs , the division behind its AR glasses, VR headsets, and VR software. At first, I yawned. Meta losing $4 billion on Reality Labs felt as predictable as the sky being blue. It’s practically a given by now.
But then it struck me: that predictability is precisely the problem. For Meta, these losses are routine behavior. Over its last 21 quarterly earnings reports, dating back to 2021, Reality Labs has accumulated a staggering $83.5 billion in total losses. That averages out to roughly $4 billion per quarter. Let that sink in , it’s bananas.
Equally astounding is that as Meta dials back its metaverse ambitions, its spending on artificial intelligence is set to become even more astronomical. True, the company isn’t hurting for cash. In the first quarter of this year, Meta posted a net income of $26.8 billion, up 61% year-over-year, while revenue climbed 33% to $56.3 billion.
But despite its social media foundation, Meta’s main goal now is to stay competitive with AI leaders like OpenAI and Anthropic. The company projected it will spend between $125 billion and $145 billion in 2026, surpassing both analysts’ expectations and its own earlier forecasts. “We are increasing our infrastructure capex forecast for this year,” CEO Mark Zuckerberg said on a public call with investors. “Most of that is due to higher component costs, particularly memory pricing. We are very focused on increasing the efficiency of our investments.”
Meta has already poured enormous sums into building a metaverse that few people wanted or cared about. Now it will take even more capital to develop an AI superintelligence that , maybe , people actually will. Last year, Meta went on an expensive hiring spree, poaching over 50 AI researchers and engineers from competitors. That helped the company ship its newly overhauled AI model, Muse Spark, earlier this month. While Zuckerberg reported “large increases” in Meta AI usage since that release, building and maintaining AI products only gets costlier.
On the earnings call, one concerned investor asked if Meta could provide an outlook for its 2027 capital expenditures. The response offered little reassurance. “We aren’t providing a specific outlook for 2027 capex, and we are, frankly, undergoing a very dynamic planning process ourselves as we’re working through what our capacity needs will be over the coming years,” replied CFO Susan Li. “Our experience so far has been that we have continued to underestimate our compute needs.”
So despite impressive quarterly results, Meta’s investors aren’t thrilled. The stock dropped more than 5% in after-hours trading.
(Source: TechCrunch)
