Meta reported a quarterly loss of $4 billion in its Reality Labs division, responsible for augmented reality glasses and virtual reality headsets. This loss continues a trend for the division, which has accumulated $83.5 billion in losses over the past 21 quarters since 2021, averaging about $4 billion per quarter.
Despite these losses, Meta’s first-quarter performance showed significant profitability, with a net income of $26.8 billion, reflecting a 61% year-over-year increase. Revenue also rose by 33% to $56.3 billion, highlighting the company’s robust position in the market.
As Meta shifts its focus from the metaverse to artificial intelligence, it plans to increase its AI spending to between $125 billion and $145 billion by 2026, surpassing previous estimates and analyst expectations. CEO Mark Zuckerberg noted that the increase in infrastructure capital expenditures is largely due to rising component costs, particularly in memory pricing.
Meta has made substantial investments in AI, including the hiring of over 50 AI researchers from competitors. This effort has contributed to the development of its AI model, Muse Spark, which has reportedly seen “large increases” in usage since its recent release. However, these enhancements come with escalating costs for both product development and maintenance.
During the earnings call, CFO Susan Li addressed concerns regarding future capital expenditures, particularly for 2027, stating that the company is not providing specific projections. Li indicated that Meta has been underestimating its compute needs, leading to ongoing adjustments in planning.
Despite the positive earnings report, market reaction has been unfavorable, with Meta’s stock falling over 5% in after-hours trading, reflecting investor apprehension about the long-term viability of its current spending strategy.
