Meta ponders whether Reality Labs could be more efficient after it loses another $4.4 billion

Reality Labs has posted another exuberant quarterly loss, but then it would feel strange if it actually made money at this stage.

Meta’s free-spending AR, XR, and metaverse division–which houses its Quest business and is reportedly putting employees through the wringer–lost $4.4 billion during Q3.

The company formerly known as Facebook said it expects those losses to “increase meaningfully year-over-year” due to ongoing product development efforts. “Within our Reality Labs segment, Q3 revenue was $270 million, up 29 percent driven by hardware sales,” said Meta.

“Reality Labs expenses were $4.7 billion, up 19 percent year-over-year driven primarily by higher headcount-related expenses and infrastructure costs. Reality Labs operating loss was $4.4 billion.”

Discussing specific business ventures, Meta CEO Mark Zuckerberg highlighted the positive critical response to the Quest 3S headset and said the company is eager to see how the device performs during the holiday season. 

Reality Labs and billion dollar losses have become something of an iconic duo. The division reported full-year losses of $16.1 billion and $13.7 billion across 2023 and 2023, and taking its latest quarterly results into account has now lost over $12.7 billion during the current fiscal year.

Meta has regularly told investors the situation will get worse before it improves, emphasising a need to speculate to accumulate in the long-term where Reality Labs is concerned.

Meta CFO Susan Li stuck to that script during a follow-up investor call, noting that Reality Labs represents a “really big investment portfolio” for Meta.

When asked when spending will begin to slow down, however, Li said Meta is currently having a “budget conversation” that includes how to make Reality Labs more efficient.

“So there is–it’s just a big portfolio in Reality Labs. It’s a place where, while the ambitions are significant and, again, span a lot of products, it’s also a place where we’re focused on efficiency, too,” she added.

“That is definitely a part of the budget conversation, which is where are the places where we can be more efficient in Reality Labs such that we have room to expand our ambitions around things like smart glasses and accelerate bringing those to market and trying to find tradeoffs as we think about the Reality Labs portfolio.”

In another earnings call, Li reiterated Meta is still “assessing” its plans for Reality Labs in 2025, and said the company is mulling over how it can “build the most flexibility into the way that we’re thinking about either infrastructure or headcount plans.”