Zuckerberg unfazed about $2.8B metaverse division loss in Q2

Meta’s virtual reality (VR) and metaverse division Reality Labs has posted its seventh straight quarter of losses, but CEO Mark Zuckerberg remains steadfast in investing in the technology, which he calls a “massive opportunity.

During Meta’s Q2 earnings call on July 27, Zuckerberg acknowledged that such losses could continue for several more years until VR applications and its Metaverse platform are mature enough to tap into the “massive opportunity” worth “hundreds of billions of dollars”

“The Metaverse is a massive opportunity for a number of reasons. I feel even more strongly now that developing these platforms will unlock hundreds of billions of dollars, if not, trillions over time.”

“This is obviously a very expensive undertaking over the next several years,” Zuckerberg added, “I’m confident that we’re going to be glad that we played an important role in building this.”

The extended stretch of operating losses for Reality Labs was revealed in Meta’s Q2 earnings report earlier in the day. Such losses are not unusual for divisions in a research and development phase.

Reality Labs builds VR and augmented reality (AR) applications to help Meta users connect over its various social platforms, including the Metaverse, with the Oculus line of VR headsets.

In addition to the losses, Reality Lab’s revenue has been trending down since 2021 and its operating margin has been trending down since 2020. The $11.1 billion in revenue and 29% margin posted in Q2 2022 are the lowest over the past seven quarters.

Reality Labs posted $2.9 billion in losses for Q1.

Zuckerberg also noted that a “challenging macro environment” could be exacerbating the losses. 

He said that the economic situation now is worse than it was a quarter ago, and his opinion is corroborated by the fact that the Federal Reserve raised interest rates by 0.75 percentage points for the second time in a row on July 27 before the Meta earnings call took place, adding: 

“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business. In this environment, we’re focused on making a long term investment that will position us to come out stronger.”

Despite the economic troubles, Zuckerberg is confident that his company and its subsidiaries will come out of the current economic downturn as “a stronger and more disciplined organization.”

He attributed this confidence to the investments his company is making now to ensure it is able to remain a leader in an industry that may be undergoing a shift to accommodate more Metaverse platforms.

Related: Experts clash on where virtual reality sits in the Metaverse

Meanwhile, the Federal Trade Commission (FTC) has filed a lawsuit against Meta alleging that the firm is aiming to monopolize the entire Metaverse market. The complaint states that Meta’s moves within the space hinder innovation and “competitive rivalry” among US-based companies looking to build Metaverse platforms and applications.

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