Top metaverse news: Zuckerberg unfazed about $2.8 billion metaverse division loss in Q2

28-Jul-2022 By: Sudeep Saxena

Reality Labs, Meta's virtual reality (VR) and metaverse division, has suffered its seventh consecutive quarter of losses, but CEO Mark Zuckerberg remains committed to investing in the technology, which he describes as a "huge potential."

During Meta's Q2 earnings call on July 27, Zuckerberg acknowledged that such losses might persist for several years until VR applications and the Metaverse platform are mature enough to capitalize on the "huge potential" worth "hundreds of billions of dollars."

Zuckerberg added, “for a variety of reasons, the Metaverse represents a huge potential. I am even more convinced that establishing these platforms will release hundreds of billions, if not trillions, of dollars over time.”

In Meta's Q2 earnings report earlier in the day, it was made clear that Reality Labs had been experiencing a prolonged period of operational losses. Such losses are common for divisions that are in the research and development stage.

Reality Labs builds virtual reality (VR) and augmented reality (AR) applications that allow Meta users to engage with the Oculus range of VR headsets via its numerous social platforms, including the Metaverse.

In addition to the losses, Reality Lab's revenue has been shrinking since 2021, and its operating margin has been decreasing since 2020. The $11.1 billion in sales and 29 percent profit recorded in the second quarter of 2022 are the lowest in the previous seven quarters.

Reality Labs reported a $2.9B loss in Q1.

Zuckerberg also noted that "a challenging macroeconomic environment might be worsening the losses."

He stated that the current economic scenario is worse than it was a quarter ago, and his viewpoint is supported by the fact that the Federal Reserve hiked interest rates by 75bps for the second time in a row on July 27, before the Meta earnings call took place.

Despite the financial difficulties, Zuckerberg is optimistic that his company will emerge from the current economic downturn as "a stronger and more disciplined organization."

He attributed this confidence to the efforts his company is making now to secure its ability to stay a leader in an industry that may be shifting to accommodate new Metaverse platforms.

Meanwhile, the FTC has filed a lawsuit against Meta, saying that the company is attempting to monopolize the entire Metaverse industry. According to the lawsuit, Meta's actions in the field stifle innovation and "competitive rivalry" among US-based firms trying to establish Metaverse platforms and applications.

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