When Meta released its quarterly earnings report on Wednesday evening, a colleague pointed out how Meta lost $4 billion on Reality Labs, the division responsible for its AR glasses, VR headsets, and VR software. I yawned at first. Meta losing $4 billion on Reality Labs just didnât seem surprising.
Itâs a given. Reality Labs lost another $4 billion, and also, the sky is blue. Then I realized, that itself is notable â for Meta, losses on this unit are quite literally average behavior.
5 billion on Reality Labs, which comes out to an average of about $4 billion in losses each quarter. That is bananas! Equally astounding is that as Meta pulls back from its metaverse ambitions, its spending on AI will be even more astronomical.
True, itâs not like Meta doesnât have the money. 3 billion. But despite its foundation in social media, Metaâs current goal is to stay competitive with AI leaders like OpenAI and Anthropic.
Meta projected that it will spend between $125 billion and $145 billion in 2026, exceeding analystsâ projections and Metaâs previous estimates. âWe are increasing our infrastructure capex forecast for this year,â Meta CEO Mark Zuckerberg said on a public call with investors on Wednesday. â Meta also spent a lot of money to build a metaverse that no one really wanted or cared about.
Itâs going to take even more money to build an AI superintelligence that (maybe some) people actually want. Last year, Meta went on an expensive hiring spree, poaching over 50 AI researchers and engineers from competitors, which helped the company ship its newly overhauled AI model, Muse Spark, earlier this month. While CEO Mark Zuckerberg reported âlarge increasesâ in Meta AI use since that release, itâs only getting more expensive to build and maintain AI products.
On the earnings call, one concerned investor asked if Meta could provide an outlook for its 2027 capital expenditures. The response wasnât reassuring. âWe arenât providing a specific outlook for 2027 capex, and we are, frankly, undergoing a very dynamic planning process ourselves as weâre working through what our capacity needs will be over the coming years,â replied Meta CFO Susan Li.
â So, despite its impressive quarterly results, Metaâs investors arenât thrilled. The stock was down more than 5% in after-hours trading.
