Meta's Metaverse Loss Deepens Amid Year of Metaverse Shift
Meta's Reality Labs, the division tasked with developing its virtual and augmented reality offerings, has recorded a staggering loss of $60 billion since 2020. Despite CEO Mark Zuckerberg's optimism about the metaverse's future, analysts question the profitability of its investments.
In its Q4 earnings, Reality Labs reported a loss of $5 billion. Although revenue saw a modest 1% increase, expenses spiked by 5%. Zuckerberg highlighted the growing user base for Quest and Horizon, but analysts remain skeptical about the metaverse's monetization potential.
Some analysts believe Meta is facing significant hardware costs and profitability challenges. Market intelligence firm IDC Global confirms Meta's dominance in the VR/AR market, but notes that augmented reality headsets still require technological advancements.
Recent AI breakthroughs by Chinese startup DeepSeek have raised questions about Meta's AI strategy and its $60-65 billion investment. Zuckerberg emphasizes the importance of establishing an American standard for AI.
Despite Meta's financial struggles, Jefferies analyst Brent Thill remains optimistic about its AI efforts and maintains a Buy rating with a $715 price target. The company's ability to integrate AI into its platforms and drive engagement and revenue is seen as a positive sign.
Forrester's research director, Mike Proulx, believes Meta's focus should remain on AI, rather than the metaverse. The lack of progress in Horizon Worlds suggests that the metaverse remains an uncertain venture.
Meta's earnings release was delayed, and the Trump administration recently reached an agreement requiring the company to pay $25 million to settle a 2021 lawsuit filed by Trump over account suspensions.