Meta lost $3.7 billion in the third quarter in its Metaphors-focused Reality Labs division

Meta reported a loss of $3.7 billion in the third quarter in its Metaphors-focused Reality Labs division.

In its quarterly call with analysts, Meta Chief Financial Officer Susan Lee said the company had revenue of about $210 million in the quarter, a 26 percent decline due to lower sales of Meta Quest 2 ahead of the virtual launch of Meta Quest 3 in October. Reality headset costs were $4 billion, or flat year over year.

Meta said in a non-news release that it expects to continue to lose money in its Reality Labs division, according to the company’s third-quarter report. Over the past 21 months, Reality Labs has lost about $24 billion.

“Finally, for Reality Labs, we expect operating losses to increase significantly from last year due to our continued product development efforts in AR/VR and our investments to further scale the ecosystem,” Meta said in its Q3 report. . September 30.

Overall, Zuckerberg said it was a good quarter with the highest operating margin in two years. This quarter benefited from the reduction in operating costs of the Reality Lab.

The company reported revenue of $34.1 billion for the third quarter ended Sept. 30, up 23 percent from $27.7 billion a year earlier. Net income was $11.6 billion, up 164 percent from $4.4 billion last year.

Daily active family members averaged 3.14 billion in September, up 7 percent from last year. The number of monthly active users was 3.05 billion, which was a 3% increase for Facebook.

Online advertising and gaming were strong in part due to growth in China. One of the biggest investments the company is making is in business artificial intelligence.

Zuckerberg said the company will shift resources toward artificial intelligence from non-AI resources at the company. He also said the company had a hiring backlog, meaning it had to replace people or add positions that were needed but not filled earlier because of hiring freezes. It’s unclear whether this will affect the reality lab’s many expenses, which focus on the metaverse, virtual reality and smart glasses.

Meta currently has about 66,000 employees, down 7% from the second quarter and 24% from last year.

Zuckerberg said that generative artificial intelligence will be increasingly important in the future.

He noted that over 30 million downloads of the big llama language model were made last month. AI-powered feed recommendations continue to grow, resulting in a 7% increase in time spent on Facebook. Threads is three months old and has 100 million monthly active users, and from what we can tell, people are loving it so far, Zuckerberg said. If we keep this up for a few more years, we’ll have a good chance of achieving our vision there.

He said the Quest 3 is the most powerful headset yet, with a form factor that’s 40 percent slimmer than the Quest 2. He mentioned that it’s a true mixed reality device, so you can see physical objects around you and put games and other animations on it. Above the real world

And he noted that the company released the second generation of Ray-Ban Meta smart glasses. You can use Meta AI, as it’s built into the smart glasses, so you can ask verbal questions and get answers through the side frame speakers. Conversational AI could be a killer app for these smart glasses, he said, and he noted that eventually AR will come to smart glasses.

He said: It is not that far.

For the Metaverse software, he said Horizon has never been faster and is being tested for phones and PCs, so it works on all devices.

One of the most interesting questions of the next decade, he said, is how the company will bring this together into a well-experienced world. Lee said Reels is likely to generate modest revenue growth going forward, and is neutral to the company’s overall advertising picture sooner than expected. Video services now account for more than half of the time spent on Instagram and Facebook. The company expects fourth-quarter revenue of $36 billion to $40 billion.

Next year, the company expects higher infrastructure spending in 2024. It expects higher operating expenses and growth in payroll costs as it hires more people to deal with the hiring shortage. And operational losses in reality labs will increase significantly due to AR/VR product costs and other R&D.

As for the geopolitical turmoil, Lee said his heart goes out to those affected by the violence in the Middle East, and the company recognizes that its services are being used in emergencies. The company is not directly exposed to the Middle East war, but has seen softer advertising spending in recent days.

“That’s something we continue to monitor,” Lee said.