Meta’s Reality Labs revenue grew 48% year-over-year in the second quarter of 2022, while costs increased 19%.
Reality Labs is the division of Meta responsible for Quest VR hardware & software, Portal video call devices, and the Ray-Ban Stories camera glasses – and also researching and developing AR glasses and other future AR and VR devices.
This is the first quarter since the company started breaking Reality Labs revenue where quarterly sales grew year-over-year more than costs. By comparison, in Q1 2022 revenues were up 35% year-over-year, but expenses were up 55%.
The division generated revenue of $452 million in the second quarter of 2022, up from $305 million in the second quarter of 2021. But the cost of this division was a whopping $3.3 billion, an increase of $2. 7 billion in the first quarter of 2021. The result is a loss of $2.8 billion, up from a loss of $2.4 billion in the first quarter of 2021.
In other words, costs are still much higher than revenues for Meta’s VR and AR division – but critically, revenues have turned a corner and are starting to grow faster than costs.
Mark Zuckerberg warned investors in October that investment in AR & VR would reduce Meta’s total profits by $10 billion in 2021, saying, “I expect this investment to grow even further in the coming years.” Despite recent cost savings in MetaCFO David Wehner confirmed today that Meta still plans to increase its investment in AR & VR.
Earlier this week Meta announced that the price of Quest 2 will increase by $100 as “the costs of making and shipping our products have increased”. Wehner told investors he expects Q3 Reality Labs revenue to be lower than Q2 — which seems to indicate he believes Quest 2 sales will fall more than 33% at the new price.