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How many of those billions went into the legs?

Bryant Francis, Senior Editor

October 27, 2022

2 Min Read
A screenshot of Mark Zuckerbergs' improved Horizon Worlds avatar.

Meta's third-quarter financial results for fiscal year 2022 are showing that the company's Reality Labs division (which houses the company known as Oculus, a number of game studios and other VR/AR hardware projects) is losing more money than ever. In the three-month period ending September 30, 2022, the division posted a loss of $3.67 billion, and only earned $285 million in revenue during the same period.

In the same period in 2021, Reality Labs lost $2.6 billion on $558 million in revenue. That means Meta's metaverse losses have increased by 39.5 percent, and its revenue has shrunk 48 percent year-over-year.

Does this mean Meta is running out of money? Not for the moment. Its advertising revenue is still earth-shatteringly high, clocking in at $27 billion this quarter (a three percent dip over last year's $28 billion in revenue). Its "Family of Apps" company division managed to shrink its losses by 28 percent, only losing $9 billion in revenue over the $13 billion it lost in the third quarter of 2021.

However, the company's profits have shrunk 46 percent year-over-year from $10 billion in profit to $5 billion in profit, and that bleeding isn't being stemmed anytime soon. Chief financial officer David Wehner wrote that the company expects Reality Labs' operating losses will "grow significantly year-over-year in 2023."

"Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run," he added. That implies that Meta is still gambling on its Metaverse investments as being reliable revenue drivers in the decade ahead.

What is Meta spending all that money on?

Legs. Okay, not just legs. Also VR studios, and an intense amount of R&D on technology that will power Mark Zuckerberg's dream of the metaverse.

We got our first look at some of that technology in Meta's Connect 2022 presentation back in early October. Some of it was impressive, some of it was middling, and some of it involved staged pre-rendered animations.

The most impressive of those investments include big swings on computing interface devices that can capture and make use of accurate hand movement, and facial capture technology that will far surpass the current uncanny animation of Horizon Worlds, Meta's user-generated content platform that is clearly inspired by Ready Player One but doesn't live up to the fantasy.

Right now Meta's best hope of off-setting its Reality Lab losses (with in-division assets) include sales of Quest 2 and Quest Pro devices. The former of these headsets might see an uptick of sales in the holiday season (with a healthy amount of revenue to match), but the latter device has rolled out to mixed results on the market. Demos at retail outlets don't seem to be going well

About the Author(s)

Bryant Francis

Senior Editor, GameDeveloper.com

Bryant Francis is a writer, journalist, and narrative designer based in Boston, MA. He currently writes for Game Developer, a leading B2B publication for the video game industry. His credits include Proxy Studios' upcoming 4X strategy game Zephon and Amplitude Studio's 2017 game Endless Space 2.

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