Meta had its best quarter since 2021 despite losing more money on the metaverse

Meta just had its best quarter since 2021, even as it continues to lose massive amounts of money on the metaverse. In fact, the company said it expects to lose even more money on its efforts in the year to come.

Reality Labs, the Meta division overseeing its virtual and augmented reality projects, lost $3.7 billion during the second quarter of 2023 and generated just $276 million in revenue, according to the company’s latest earnings report. And the company, once again, said it expects its metaverse spending to accelerate. CFO Susan Li said that Meta is expecting Reality Labs’ losses to “increase meaningfully” compared with last year, when it lost more than $13 billion on the efforts.

Meta CEO Mark Zuckerberg tried to downplay the significance of the losses. “We remain fully committed to the metaverse vision,” he said during the company's earnings call. When pressed for more details on the company’s metaverse spending, he pointed to the upcoming Quest 3 headset, which he said would launch at Meta’s Connect event in September. “This is going to be the biggest headset that we've released since 2020,” he said. “There are just a lot of expenses related to bring that to market.”

Aside from the metaverse, it was an otherwise a strong quarter for Meta, which reported $32 billion in revenue, an 11 percent increase from last year. Zuckerberg touted Reels, which are now drawing 200 billion views a day across Facebook and Instagram, thanks to the company’s renewed emphasis on AI-driven recommendations. He also highlighted the recent launch of Threads and the company’s Llama 2 large language model.

Though early analytics data has suggested Threads engagement has declined substantially since its launch, Zuckerberg said the company is “seeing more people coming back daily than I'd expected” and that he sees a path for the app to eventually reach “hundreds of millions” of users.

Meta also confirmed that the bulk of its layoffs, which resulted in the company shedding more than 20,000 jobs since last fall, have been “substantially completed.” Zuckerberg previously dubbed 2023 as Meta’s “year of efficiency” as he cut staff and attempted to streamline the company’s management structure. Zuckerberg pointed to Threads’ launch, which he said was overseen by a relatively small team, as proof that “cultural changes” at Meta are working.

Zuckerberg didn’t, however, offer a timeline of when he thought the company’s metaverse spending might start to pay off. “This is a very long term bet,” he said, “You know, on a deep level, I understand the discomfort that a lot of investors have with it. And look, I mean, I can't guarantee you that I'm gonna be right about this bet —I do think that this is the direction that the world is going in.”