- Meta revealed financials for its "metaverse" business for the first time.
- Reality Labs reported massive, growing losses — more than $10 billion in 2021 alone.
- The losses show Facebook is spending massive amounts of money to find its next stage of growth.
Building the metaverse isn't cheap.
Meta, Facebook's parent company, revealed, for the first time, the financials of its Reality Labs division in its fourth-quarter 2021 earnings report Wednesday.
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That's the segment of the company tasked with building CEO Mark Zuckerberg's vision for the metaverse. It also includes revenue from hardware, such as the company's Meta Quest virtual reality headset.
So, how's Zuckerberg's big pivot to the metaverse performing so far?
As expected, Reality Labs reported massive, growing losses — more than $10 billion in 2021 alone.
Take a look at the net losses for Meta's Reality Labs for the full years 2019 through 2021:
- 2019: Net loss of $4.5 billion on $501 million in revenue
- 2020: Net loss of $6.62 billion on $1.14 billion in revenue
- 2021: Net loss of $10.19 billion on $2.27 billion in revenue
The losses for 2021 are in line with what Zuckerberg said last year he expected to invest in Reality Labs. And the losses will likely only get bigger this year. Meta's CFO said on the company's earnings call Wednesday he expects operating losses to "increase meaningfully" in 2022.
The losses also put a drag on Meta's overall profitability for the year. The company would have had more than $56 billion in profit for all of last year had it not been for Reality Labs.
Let's really put that in context: Reality Labs lost $3.3 billion in the fourth quarter of last year. Alphabet's Other Bets segment, which includes all those wild projects such as self-driving cars and health-care technology, lost about half that, $1.45 billion, during the same period.
The questions now become: What is Meta spending all that money on? And when does the spending spree stop? The company's CFO attributed $4.2 billion of the losses to employee costs, research and development, and costs of items sold.
Reality Labs' financials also show Meta's advantage in building the metaverse. It effectively has unlimited amounts of money to spend on these projects, unlike smaller metaverse rivals such as Roblox or Epic Games.
Plus, Meta could have a decade or more to pull it off before investors get impatient. Executives have already said it could take up to 15 years to fully realize their vision. That's more than enough time for Meta to pivot to a new strategy as it looks for new sources of growth.
But even Meta's core business disappointed on Wednesday. Shares plummeted more than 20% in late trading after Meta missed profit estimates, thanks in part to those Reality Labs losses.