Meta today revealed its latest quarterly earnings results, showing that Reality Labs, the company’s XR and metaverse arm, had a smaller holiday season than the last, while operating costs have reached their highest levels yet.

Today during the company’s Q4 earnings call, Meta revealed the latest revenue and operating cost figures for its XR and metaverse division, Reality Labs, providing one of the clearest indicators of the success the company is seeing in this space.

The fourth quarter has consistently been the best performer for Reality Labs, no doubt thanks to the holiday season driving sales of the company’s offerings.

In the fourth quarter of 2022, Reality Labs saw $727 million in revenue, which was 17% less compared to the fourth quarter of 2021 when the division pulled in $877 million in revenue.

The fourth quarter of 2021 was a good performer for Reality Labs revenue thanks to the success of Quest 2 which had launched earlier that year.

In the fourth quarter of 2022, the company’s latest headset to launch was Quest Pro, it’s high-end MR headset. Unsurprisingly, the more expensive device—which has yet to find a strong value proposition at $1,500—doesn’t seem to have performed as well as Quest 2 did in its launch year. Just days ago, Meta temporarily discounted the price of the headset to $1,100, appearing to test the waters at that lower price. Granted, XR headsets aren’t the only product Reality Labs offers, which means the division’s other product lines—video calling speakers and smart glasses—may have had a role to play.

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In addition to a smaller holiday season than last year, the latest earnings for Reality Labs show the division’s expenses were greater than in any previous quarter, surpassing $5 billion for the first time.

This continues a trend of Meta’s ever-growing investments in Reality Labs which the company has warned investors may not flourish until the 2030s.

In the face of operating costs far outpacing revenue, Meta CEO Mark Zuckerberg told investors that his management theme for 2023 was “efficiency,” saying he wants to focus the company on streamlining its structure to move faster while being more aggressive about shutting down projects that aren’t performing.

Update (February 2nd, 2023): A prior version of this article transposed ‘operating loss’ figures in place of ‘operating cost’. The figures have been updated for greater accuracy, though the overall story remains the same.

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Ben Lang
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."
  • MeowMix

    Yup, if we remember and go back to their previous earnings call, it was mentioned this was to be expected due to the price increase on the Quest2.

  • Kenny Thompson

    Game of the Year, What the Bat, didn’t compensate for the lack of quality new releases!?

    • ViRGiN

      Was it GOTY in this website?
      Both leading website takes money from Turd Studio also known as aexlab vail vr – and none covered it outside of sponsored ads and articles.

      They won’t say a single good or bad word about game they take money from.

  • NL_VR

    We are lucky there is company willing to burn money on this.
    Were would VR be if not Meta burned all this money and no one else did?

    • Jonathan Winters III

      This is truth, although expect to be flamed by the vocal minority of FB haters.

      • NL_VR

        Always Meta haters and always VR haters lurking these forums.

  • VR5

    If I’m reading that graph right ’22 did still beat ’20 slightly, which is a pretty good result. The holiday season just after the Quest 2 launch was the first time Oculus could impress with sales, both hardware and software.

    ’21 was the holiday when PS5 was hard to obtain and the main stream press claimed parents only bough Quest 2 because of that shortage. Quest 2 also had been able to maintain momentum with high profile releases and RE4, which lasted them into the first half of ’22.

    That Meta could repeat ’20 success despite price hike and lack of a high profile game of RE4’s caliber is quite a good showing. Depending on lineup ’23 could be really big again and hopefully even beat holiday ’21.

    • Christian Schildwaechter

      “Pretty good result” is a stretch.

      – Operating costs in Q4 2022 were almost double those in 2020, which may include a lot more advertising.
      – The PS5 was still hard to obtain in 2022. Maybe not as bad as 2020, but Sony said they will only be able to catch up with demand in early 2023.
      – The base price of the Quest 2 was raised by 1/3rd, so generating the same amount of revenue from hardware would mean 25% less Quest 2 were sold than in 2020.
      – Even though only a limited number of Quest Pro have been sold, each one cost almost as much as four Quest 2.
      – By now there should be 15mn+ Quest 2 out there, so software revenue from the Oculus store should have increased significantly over 2020, taking a larger cut of the total revenue.

      Combine these and 2022 Quest 2 unit sales were probably only 2/3rd of those in 2020. And while some may have be holding out for the Quest 3, these are mainly people already somewhat invested in VR. The majority of regular buyers would not be aware of that discussion, but a lot more of them should have been aware in 2022 that the Quest 2 even exists compared to 2020 thanks to all the metaverse hype in the mainstream press in early 2022, so more should even have considered buying one.

      • VR5

        – Operating costs in Q4 2022 were almost double those in 2020, which may include a lot more advertising.

        Operating cost is mostly R&D for AR glasses and you know that. Given how Zuck is invested in bringing the future like yesterday, VR game sales could never pay for AR advancement. That’s what FB/IG profits are for.

        – The base price of the Quest 2 was raised by 1/3rd, so generating the same amount of revenue from hardware would mean 25% less Quest 2 were sold than in 2020.

        You forget about software sales, which are lost for every hardware unit not sold. Meta Quest app (which is needed to use the Quest 2) downloads suggest that christmas sales were only down 15% over ’21, which was up over ’20 by 166%. 30% down compared to ’20 is thus much too high (app download sales would even suggest an increase over ’20 of 125%).

        Obviously used sales will also lead to new app installs but for christmas I would assume the ratio of new hardware to be higher than throughout the year.

        – The PS5 was still hard to obtain in 2022. Maybe not as bad as 2020, but Sony said they will only be able to catch up with demand in early 2023.

        PS5 was much easier to obtain than before, as evident in shipment numbers. Still hard =//= still as hard.

        – Even though only a limited number of Quest Pro have been sold, each one cost almost as much as four Quest 2.

        Quest Pro is a non starter really, it might as well not have released at all. It is not competitive with the Quest 2 even at a slightly higher price point. Pro’s failure merely serves to prove the Quest 2 approach to be the right one.

        – By now there should be 15mn+ Quest 2 out there, so software revenue from the Oculus store should have increased significantly over 2020, taking a larger cut of the total revenue.

        This is true, and although retention on Quest is much better than on previous VR platforms it is still not comparable to traditional gaming. I blame comfort and software library (which is good but is lacking meaty and core oriented content).

  • Jonathan Winters III

    That’s impressive for Q4 2022, considering we’re in a recession with overall consumer buying down due to inflationary effects, and considering there were few smash hit games released on Quest in 2022.

    • Sven Viking

      If they’re comparing headset sales to the same quarter last year, there’s also the Quest 2’s substantial price increase.

  • sfmike

    ” Meta CEO Mark Zuckerberg told investors that his management theme for 2023 was “efficiency,” saying he wants to focus the company on streamlining its structure to move faster while being more aggressive about shutting down projects that aren’t performing.” Let’s just hope the board doesn’t decide that VR is the project that’s not performing and needs to be shut down.

  • Arno van Wingerde

    I am not happy seeing these numbers: VR still needs to grow kind of exponentially at this stage. I think the most positive take is growth is still occurring, if we consider that COVID is past and people get more of a life again – but we still run the risk of becoming the next 3D TV if there are not more games coming to VR. So far, the best showing of AAA games, which I haven’t seen seems to be mods for the PC – few companies release real games for VR. I hope the renewed presence of Sony with a stronger focus on good games helps stir things up! I wonder what Meta is burning all the money on – so far I have not seen much in the way of games…

  • Paul Bellino

    Bring John back. also, you were supposed to get more AAA games. Where are they? Even if you pay a fee to have some current flat AAA games converted you would be better off than what you are doing now. You release crappy games the no one want to play. You are sitting on a Gold mine and are making very stupid decisions.