Meta’s Reality Labs loses $4.62B as revenue outlook falls short

• Division’s cumulative operating losses exceed $80B since late 2020

Meta’s Reality Labs division recorded an operating loss of $4.62 billion in the second quarter, while the company issued a weaker-than-expected revenue forecast amid concerns over its rising artificial intelligence spending.

The unit’s operating loss widened from $4.53 billion in the same period last year but was smaller than the analyst's forecasts.

Reality Labs generated $431 million in quarterly revenue, up 16.5% from $370 million a year earlier and above estimates.

The division develops Meta’s Quest virtual reality headsets and Ray-Ban Meta smart glasses, produced in partnership with eyewear company EssilorLuxottica.

Reality Labs has accumulated more than $80 billion in operating losses since late 2020 as Meta has invested heavily in virtual and augmented reality technologies.

For the third quarter, Meta forecast revenue of between $61 billion and $64 billion. The midpoint of $62.5 billion was below analysts’ average estimate of $63.2 billion.

The company also narrowed its full-year capital expenditure forecast to between $130 billion and $145 billion, raising the lower end from its previous range of $125 billion to $145 billion.

Meta is investing heavily in AI products, data centers and AI-powered wearable devices, financing much of that spending through its core advertising business.

Meta shares fell about 6.6% in after-hours trading after closing Wednesday at $585.61 in New York.