Did the Metaverse just ditch Meta? Reality Labs reports $2.9 billion in losses

Lavina Daryanani
Source: techcrunch.com

It is the earnings call and quarterly report release season, and one by one, Wall Street companies are releasing documents outlining the performance over the past 3-months. Meta Platforms [known as Facebook previously] released its Q1 results for this year on Wednesday.

Per Reuters, the total revenue of the platform rose 7% to $27.91 billion in Q1, but missed analysts’ estimates of $28.20 billion, according to IBES data from Refinitiv. Its net income, on the other hand, fell 21% to $7.47 billion in the first quarter but beat analysts’ estimates of $7.15 billion.

On the whole, Meta recorded its slowest revenue growth in a decade.

Source: Reuters

Additionally, the social media platform’s daily active users stood at 1.96 billion, slightly higher than Refinitiv’s IBES data of 1.95 billion. As a result, Meta’s shares climbed by 18% in the after-trading hours on Wednesday. Notably, a dip in the DAU had triggered the 26% price tumble in February.

Did the metaverse just ditch Meta?

Reality Labs, on its part, posted a $2.9 billion loss in the first quarter. As such, Reality Labs is Meta’s metaverse arm and focuses on VR and AR products and services. The said figure represents an incline from the $1.8 billion loss in Q1 of last year. As far as the revenue side is concerned, Reality Labs earned $695 million during the first quarter of this year, up from Q1 2021’s $534 million.

The earnings report stated,

“We expect 2022 total expenses to be in the range of $87-92 billion, lowered from our prior outlook of $90-95 billion. We expect 2022 expense growth to be driven primarily by the Family of Apps segment, followed by Reality Labs.”

Back in February, when the previous quarter’s report was released, Dave Wehner, the Chief Financial Officer of the company asserted that the loss of the meta segment would increase this year, and they were prepared for it.

“We do expect reality labs’ operating loss to increase meaningfully in ’22, and that’s incorporated into our outlook.”

As highlighted in a commentary piece back then, Meta’s spending is unlikely to recede anytime soon, especially given the fact that it is now in a full-throttled race against other tech giants to claim ground and create a niche for itself in the metaverse. With other giants like Microsoft, Apple, and Netflix exploring the space too, Meta would have to continue putting its best foot forward.