Meta’s AR/VR Revenue Now Growing Faster Than Costs

Meta’s Reality Labs revenue grew 48% year-over-year in Q2 2022, while costs grew 19%.

Reality Labs is the division of Meta responsible for Quest VR hardware & software, Portal video calling appliances, and the Ray-Ban Stories camera glasses – as well as researching and developing AR glasses and other future AR and VR devices.

This is the first quarter since the company began breaking out Reality Labs revenue where quarterly revenue grew more than costs year-over-year. For comparison, in Q1 2022 revenue grew 35% year-over-year but costs grew 55%.

The division brought in $452 million revenue in Q2 2022, up from $305 million in Q2 2021. But the cost of this division was a whopping $3.3 billion, up from $2.7 billion in Q1 2021. The result is a loss of $2.8 billion, up from a loss of $2.4 billion in Q1 2021.

In other words, cost still far outstrips revenue for Meta’s VR and AR division – but critically, revenue has turned a corner and started to grow faster than costs.

Mark Zuckerberg warned investors in October that investments in AR & VR would reduce Meta’s overall 2021 profit by $10 billion, and said “I expect this investment to grow even further for each of the next several years”. Despite recent cost cutting across Meta, CFO David Wehner confirmed today Meta still plans to increase its investment in AR & VR.

Earlier this week Meta announced the price of Quest 2 is rising by $100 as “the costs to make and ship our products have been on the rise”. Wehner told investors he expects Q3 Reality Labs revenue to be lower than Q2 – that seems to suggest he believes Quest 2 sales will drop by more than 33% at the new price.

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