During Facebook’s Q4 2015 earnings call this week the company reiterated conservative expectations for Oculus Rift sales in 2016.

Responding to a question by Macquarie Group analyst Ben Schachter, Facebook CFO Dave Wehner said that revenues relating to the Rift wouldn’t be “material” to the company’s 2016 financials:

Schachter: On virtual reality, another question. Can you just discuss the supply constraints in terms of how many units you can ship per month? And should we expect those shipments to accelerate into the holiday? Then also related to that, how are you going to work with retailers to show consumers the power of Oculus in-store and in person? Thanks.

Wehner: So Ben, just following up on VR and supply constraints, so we have two products… you’ve got Gear VR and Samsung is really handling all of that from a hardware perspective, and obviously they are well prepared on that front. With Rift, it’s really… you know it’s early in the evolution of VR. It’s early to be talking about large volume, so at this point I don’t think we’re giving a lot of color around supply chain and that sort of thing. It’s not going to be material to our financials this year.

Facebook nor Oculus have given any specific sales figures for the Oculus Rift which became available for pre-order in early January and is set to ship the earliest units at the end of March. Currently the headset is backordered some four months.

oculus rift carrying case (4)
See Also: The Oculus Rift Will be in Retail Stores Come April

With Facebook’s 2015 revenue sitting at $17.93 billion, it’s tough to say exactly how much money constitutes “material”. As the company’s earnings slides list revenue in thousands of millions, it should be a safe bet to think that anything pushing the needle by a minimum of $1 billion dollars would certainly constitute “material.” Put into perspective, $1 billion in Rift sales would be 1.67 million units at the current $599 pricetag.  To be less safe, but perhaps more reasonable, $500 million in revenue (which I suspect shareholders would agree is “material”) would track to 834,724 Rifts at the current price.

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Any way you slice it, it seems that Wehner’s statements call into question projections and forecasts expecting multiple millions of Rift headsets to be sold in 2016. Sales of less than a million units in 2016 is consistent with prior statements from both Facebook and Oculus CEOs, Mark Zukcerberg and Brendan Iribe.

Iribe told CNBC earlier this month that Oculus could produce “many tens of thousands into the hundreds of thousands [of Rifts] no problem this year…” During Facebook’s Q3 2015 earnings call, prior to the headset opening for pre-orders, Zuckerberg set expectations for first year Rift shipments in the “hundreds of thousands of units”, comparing the development of the VR industry to that of the early smartphone market.

See Also: What Our Audience Thinks About Rift, Vive, and PlayStation VR Prices

Responding to a question during this week’s Facebook Q4 2015 earnings call about whether or not he was happy with Rift pre-orders, Zuckerberg said, “Yes, I am happy. I don’t show much joy, but I’m happy. Sorry [laughing]. It’s going to be gaming for the beginning. I mean, that’s the initial market. There are about—I think it’s around 250 million people who have Xboxs, PlayStations, or Wiis. That’s the initial market of folks who we think are going to be most interested in the early VR experiences, especially at some of the higher price points.”

For Palmer Luckey’s part, the founder of Oculus, he said days after Rift pre-orders opening that they were “going much better than I ever could have possibly expected.”

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Ben is the world's most senior professional analyst solely dedicated to the XR industry, having founded Road to VR in 2011—a year before the Oculus Kickstarter sparked a resurgence that led to the modern XR landscape. He has authored more than 3,000 articles chronicling the evolution of the XR industry over more than a decade. With that unique perspective, Ben has been consistently recognized as one of the most influential voices in XR, giving keynotes and joining panel and podcast discussions at key industry events. He is a self-described "journalist and analyst, not evangelist."
  • Paul Epstein

    If they’re being sold at, or very close to cost, then it doesn’t matter how many units are sold- it will still be immaterial to the bottom line, despite selling a large number of units.

    Facebook is very likely losing money still when looking at the full picture, and are planning on the investment paying out over time as arbitrage between manufacturing cost and consumer sales emerges. Trying to profit meaningfully from the rift right now might increase the price to the point that development of games is threatened. Lack of games means that no amount of price decreases in the future will offset the development costs already sunk into it, as demand will have been strangled in it’s crib.

    • MasterElwood

      Exactly. If they don’t make any profit, they could sell 500 mil. – and still it would not be “material”.

    • Brian Hart

      I thought the same thing, but the question posed was in regards to _revenue_, not the bottom line.

      • Brady Wright

        Actually, the question was about shipping volume, and the answer that came was about financial impact. Clearly a unit that is being sold near cost is not going to have a financial impact in the near term, regardless of how many units get shipped.

  • phozon

    we have no idea what they expected for the pre orders.. they could have sold only 60,000 and say thats more than they expected.

    • MasterElwood

      True. On the other hand: They produce RIFTS at a rate of at least 110 p/h since september. In china that probably equals 2500 RIFTS per day (24h producing) or 1250 RIFTS per day (12h producing). From september on.

      • FloridaOJ

        ^At those rates, it’d take them 13 – 26 months to put out 1,000,000 units.

        • MasterElwood

          They already announced that they are ramping up production because of the high demand…

      • CURTROCK

        Just curious..where did u get the info on how many Rifts p/h can be produced?

        • MasterElwood

          They told us at Oculus Connect 2.

  • Kev

    I think a lot of the 2016 revenues wouldn’t even be officially booked until Q1 2017. So much goes into when revenues appear in the audited financials. It’s likely this is not a strong indicator of raw numbers of units sold. Even direct sales have to fully clear and if you are running through any channels like Best Buy and others they are on terms FOB. If they anticipate most of the large quantity to be in Q4 those certainly wouldn’t appear until Q1. I bet even some of the Q4 sales appear in Q2 2017. This is probably a non-news story.

  • user

    At this early point in time revenue and growth of the market of this new computing platform and market share are much more important than profitability.
    Even if they can never make money off the hardware they need to be a key player that can use its position to sell more ads and ads at higher prices in immersive experiences later on.
    They can use their position and experiences to increase their chances to become the most important social media platform on the new vr/ar computing platform.

  • Well, since Facebooks revenue is through the roof, I think nobody really expected that?

    • user

      expected what?

  • OgreTactics

    The Industry kool aid (if not completely head-aching hypocrisy) towards VR and the price of headset makes me nauseous.