Reality Labs Revenue Drops to Lowest Point on Record Ahead of Quest 3 Launch

Meta, the parent company of Facebook, released its third-quarter earnings today, unveiling a significant decline in revenue for its Reality Labs XR division. This dip in revenue comes just on the heels of the highly anticipated launch of Quest 3. The company now turns its attention to the forthcoming holiday season in hopes of revitalizing its performance in the AR/VR market.

During its Q3 earnings call, Meta disclosed the latest figures for Reality Labs revenue. Despite a previous surge in revenue when Quest 2 dominated the market, the division experienced a steady decline as the headset aged. As a result, Reality Labs recorded $210 million in revenue for Q3 2023, reflecting a staggering 27% year-over-year decrease. This marks the lowest point in revenue since Meta began reporting Reality Labs’ financial performance in Q4 2020. Here, we have to mention that history and statistics show that there is always a drop of revenue before launching a new product, Quest 3, on the market. Also, we’re in part of the year that Big holidays such as Thanksgiving and Christmas are approaching, and people are saving for the newer product and for the upcoming holiday discounts.

The continuous decrease in revenue is attributed to Meta’s substantial ongoing investments in Reality Labs, which led to an overall loss of $3.74 billion in Q3 2023. This trend of substantial losses has persisted over the last 12 quarters, a situation that Meta had previously cautioned investors about, with the expectation that these investments might not yield significant returns until the 2030s.

The following quarter is anticipated to witness a notable revenue surge for Reality Labs, driven by the release of new hardware and the holiday shopping season.

Notably, Quest 3 and Meta’s innovative Ray-Ban smartglasses made their debut immediately after the close of Q3, meaning the full impact of these products on revenue will only be visible in the company’s Q4 earnings report.

Historically, the Q4 holiday quarter has been the standout performer for Reality Labs, and all eyes are on whether Q4 2023 can surpass the division’s record revenue of $877 million in Q4 2022.

As for insights from the earnings call, Meta’s executives had little to divulge regarding the performance of Quest 3 and the Ray-Ban smart glasses. Their comments were limited to expressing satisfaction with initial reviews and enthusiasm for having these new products on the market as the holiday season approaches. The market awaits the full financial impact and consumer reception of these recent releases.

Meta unveiled its latest offering, the Quest 3 VR headset, this past September, touting it as a technically advanced successor to the Quest 2. The new device introduces an enhanced “passthrough” feature that promises to deliver a more immersive mixed-reality experience, bringing the gap between the virtual and physical worlds.

The Quest 3 comes with a starting price tag of 499$, a 200$ increase from its predecessor, the Quest 2. Despite the bump in cost, it remains significantly more affordable than Meta’s high-end Quest Pro VR headset, which carries a price tag of 999$.

Meta is positioning its Quest series as a cost-effective entry point for individuals seeking a taste of VR, especially when contrasted with Apple’s eagerly anticipated Vision Pro mixed reality headset. Scheduled for release next year, the Vision Pro is expected to come with a premium price of $3,499, making the Quest 3 and its counterparts a more budget-friendly choice for consumers.

Earlier this year, in June, Meta introduced the Meta Quest+ VR subscription service. This service, priced at $7.99 per month, enables users to access two new VR games each month. It’s compatible with Quest 2, Quest Pro, and the recently launched Quest 3 VR headsets. This move by Meta aims to offer consumers an affordable and enticing way to enjoy a growing library of VR content, enhancing the appeal of their devices.

As the battle for supremacy in the VR market heats up, Meta’s Quest 3 VR enters a shifting landscape where competition is on the horizon. Developers and tech enthusiasts eagerly await the launch of Apple’s Vision Pro headset, hoping it will serve as a catalyst for the VR and AR industry, eventually pushing it into the mainstream. Only time will tell how these developments will reshape the future of immersive technology

As Meta navigates these challenges in its Reality Labs division, it will be interesting to observe how the AR/VR market responds to Quest 3 and other innovations in the coming months, with the hope of a positive turnaround in the company’s fortunes.