Meta Reality Labs' quarterly revenue grew 30% year-over-year in the first quarter of 2024.
Reality Labs is the Meta division behind Quest headsets, the Ray-Ban Meta smart glasses and research and development towards AR glasses and their neural wristband input device.
In its first quarter 2024 earnings call today, Meta reported quarterly Reality Labs revenue of $440 million, up 30% from first quarter 2023. Meta CFO Susan Li told investors that these record revenues were “driven by sales of Quest- headsets”. However, it is also 36% lower than the first quarter of 2022 and 18% lower than the first quarter of 2021.
This suggests that Quest 3 will continue to sell beyond its launch quarter, during which Reality Labs' highest quarterly turnover everbut doesn't maintain post-launch sales momentum as well as Quest 2 (although it does). higher retention).
That's almost certainly because Quest 3 launched with a $200 higher entry price. Even adjusted for inflation, it's still $150 higher, putting it in a different price range than Quest 2.
A leaked Meta hardware roadmap from last year and reports from The Wall Street Journal, Bloomberg and a Chinese analyst who has been reliable in the past suggest that Meta plans to launch a cheaper version of Quest 3 soon to directly replace Quest 2 , reportedly called “Quest 3S” or “Quest 3 Lite”. Meta's recent actions suggest it's trying to clear out stock of Quest 2 and official accessories to make way for this new, cheaper headset.
This cheaper version of Quest 3 will be crucial to Reality Labs' prospects for achieving overall growth this year.
Reality Labs reported $4.29 billion in expenses in the first quarter of 2024, a minuscule 1% decrease compared to the first quarter of 2023.
That means Reality Labs posted a quarterly loss of $3.85 in the first quarter of 2024. But while describing this as a loss in a financial sense is technically correct, in reality it is more accurate to describe the bulk of it as a long-term investment. XR headsets like Quest are still a relatively early technology, far from maturity, and Meta hasn't even launched its first AR glasses yet. More than 50% of Reality Labs' expenditure goes to research and development of AR glasses.
Furthermore, the fact that Meta manages to reduce quarterly costs by 1% and increase revenue by 30% suggests that Reality Labs is slowly making progress on the path to profitability. It could also indicate that Quest 3 is less subsidized than Quest 2.
As in previous quarters, Susan Li told investors that she expects these losses to continue to increase significantly in the coming year due to “continued product development efforts and our investments to further scale our ecosystem.”
Mark Zuckerberg has told investors in the past that he doesn't expect Reality Labs to be profitable before 2030, as he sees it as a long-term investment in the future of computing.