Reality Labs is Taking Away the Majority of Meta Stocks (20%)

As Reality Labs Loses Billions for the Third Quarter in a Row, Meta Stocks Drop 20%

A division of Meta platforms (previously Facebook Inc.), reality labs create hardware and software for virtual reality (VR) and augmented reality (AR), including virtual reality headsets like Quest and online platforms like Horizon Worlds. The firm that developed the Oculus Rift virtual reality headgear for video games and was launched in 2012 by Palmer Luckey, Brendan Iribe, Michael Antonov, and Nate Mitchell is now known as Reality Labs. Before the acquisition, Oculus ran a crowdfunding campaign on Kickstarter to generate money for the project, reaching roughly ten times the original $250,000 objective.

Facebook changed its name to Meta precisely one year ago after announcing Horizon Worlds as its new flagship product, which it intends to greatly develop. The Wall Street Journal reports that the overall user base of Horizon Worlds hovers around 200,000, the majority of whom leave the site within their first month. At the moment, the platform is still working to expand its audience, but with little success. Contrast this with the reduced milestone of 280,000 users from the original 500,000 people expected for the end of 2022. The platform's adoption is further hampered by the expensive VR headset required to utilize it, which puts it in direct conflict with other, more widely used, with free options like VRChat.

Recently released financial data from Meta paints a very poor picture of the company's virtual reality-centric universe. The company responsible for creating Horizon Worlds, Reality Labs, suffered its worst quarter to date, the article claims. Although the VR portion of Meta's business generated roughly $285 million in Q3, Reality Labs has also reportedly cost its parent firm $3.67 billion. We may calculate the cost to Meta of roughly $9.44 billion this year alone when we add the performance of Reality Labs over the full 2022. However, there are still two months remaining, and while some metaverse pessimists might think that's enough time for the business to at least partially recover its losses, Facebook executives don't agree.

At the time this post was being written, Meta's stock price had fallen by -19.66% in after-hours trading following the market closed last night, which happened to closely follow the report's publication. At the time of closing, Meta shares were selling for $129.82, a startling fall from the price of $338.54 exactly one year earlier. The price dropped to $104.30 as a result of the after-hours trades. A firm spokeswoman claimed that officials had somewhat anticipated the falling stock price and that it might continue into the following year.

"We do expect Reality Labs operating losses to increase dramatically year over year in 2023. Beyond 2023, we anticipate pacing Reality Labs investments such that we can eventually reach our long-term objective of increasing overall company operating profitability. The determined demeanor of Meta's spokesperson may hint at a secret benefit that the public is not yet aware of, but for the time being, Horizon World's low user base and rising operating costs could hamper the spread of the metaverse.