Meta reported fourth quarter and full year earnings on Wednesday that beat expectations across the board, despite the company continuing to throw huge amounts of money at two initiatives that Mark Zuckerberg considers crucial for its future success: AI and Reality Labs, aka all things connected to virtual and augmented reality and the metaverse. While Meta’s AI ambitions drove an increase in capital expenditure that is projected to ramp up further in 2025, the company’s Reality Labs division continues to bleed money.
In 2024, the operating loss of Meta’s Reality Labs division amounted to a record $17.7 billion, bringing the total losses of Mark Zuckerberg’s big bet close to $70 billion for the past six years. At the same time, the division generated just $2.1 billion in revenue last year, highlighting how far from profitability Meta’s forays into virtual and augmented reality still are. While Meta is in the comfortable position to be able to afford a luxury like this – after all, its Family of Apps division generated $87 billion in operating profit last year – it is now working on two hugely expensive projects at the same time, generative AI and AR/VR.
Speaking about these initiatives in an earnings call, Mark Zuckerberg said the 2025 is going to be a pivotal year in determining the trajectory of Meta’s long-term projects. “This will be the year when we understand the trajectory for AI glasses as a category,” Zuckerberg said. “Many breakout products in the history of consumer electronics have sold 5-10 million units in their third generation. This will be a defining year that determines if we're on a path towards many hundreds of millions and eventually billions of AI glasses – and glasses being the next computing platform like we've been talking about for some time – or if this is just going to be a longer grind.”
With respect to these huge investments, Zuckerberg also laid out a plan for how to fund them, saying that AI advancements in particular will be used to increase revenue growth, be it by making content suggestions more engaging or by improving ad efficiency, for example by using more advanced models to determine which ads are shown to which users.