Meta investors ask whether there is ‘light at the end of the tunnel’ for Reality Labs

Meta investors have asked company leadership whether there is “light at the end of the tunnel” for Reality Labs after the struggling division reported $4.2 billion in operating losses during the first quarter of the fiscal year.

The latest losses were highlighted in the company’s fiscal report for the quarter ended March 31, 2025. It comes after Reality Labs lost a staggering $17.7 billion during the 2024 fiscal year—with losses of $4.9 billion reported during Q4 alone—and continues a long-term trend that clearly has investors wondering when the company’s great metaverse bid will begin to pay off.

During a transcribed earnings call, Evercore ISI senior managing director Mark Mahaney voiced those concerns. “Is there light at the end of the tunnel?,” he asked. “Is there a reason to think, is there a factor that would occur that would cause those losses to come down and when would that be? But maybe more importantly, what is going to cause those losses to come down?”

In response, Meta CEO Mark Zuckerberg claimed Reality Labs is focused on becoming more efficient but also needs the capacity to “distribute and grow very quickly” as new technologies—such as its AI-powered smart glasses—gain traction.

“If you look at some of the leading consumer electronics products of other categories, by the time they get to their third generation, they’re often selling 10 million units and scaling from there. And I’m not sure if we’re going to do exactly that, but I think that that’s like the ballpark of the opportunity that we have,” he added.

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“And that’s something that I think we’re kind of focused on scaling to that and then scaling beyond that for the generations after that. So I think some of the effort that we’re doing is going to—we’re going to get more efficient in some parts of the work that we do. But then as a bunch of the products start to hit and start to grow even bigger than the number that I just said is just sort of like the near-term milestone, then I think we’ll continue scaling in terms of distribution.”

Layoffs, losses, and dwindling hardware sales dominate Reality Labs discourse

Looking at the performance of Reality Labs’ product slate, Q1 revenue fell by 6 percent year-on-year to $412 million due to lower sales of Meta Quest hardware. That decline was partially offset by increased sales of Ray-Ban Meta AI glasses. Reality Labs expenses increased by 8 percent year-on-year to $4.6 billion. 

Reality Labs employees have been a target of layoffs over the last year. In June 2024, The Verge reported the division had been restructured into two groups: a ‛Metaverse‛ organization comprising the Quest business and a ‛Wearables‛ group focused on other hardware initiatives. On April 25 of this year, Bloomberg reported that over 100 workers were laid off across the business unit.

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Prior to that, Meta made 5 percent of its workforce redundant to “move out low performers faster” after laying off 21,000 employees across 2022 and 2023.

Although Meta has been making cuts across the board, company CFO Susan Li has previously indicated Reality Labs is simply a division where investors should expect some bloat in service of ambition.

“It‛s just a big portfolio” she explained in Q3 2024. “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.”

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