Reality Labs

Meta’s Q3 earnings beat expectations with $7.25 EPS and $51.24 billion revenue, driven by strong ad sales and user growth. However, shares dipped due to a $15.93 billion tax charge related to new legislation. The company anticipates long-term tax benefits from this. Meta projects Q4 revenue between $56-59 billion but increased its full-year expense guidance to $116-118 billion, reflecting AI infrastructure investments. Reality Labs reported a $4.4 billion loss. The company highlighted the success of AI-powered glasses and increasing AI adoption.

Despite substantial losses in its Reality Labs division, Meta continues investing in VR/AR technologies for the metaverse. Q3 saw a $4.4B operating loss on $470M in sales. While VR headsets face headwinds, Meta anticipates growth in AI glasses revenue, driven by strong demand for its $799 Meta Ray-Ban Display glasses. These glasses, integrating AI for real-time translation and hands-free control, boosted EssilorLuxottica sales. A strategic shift towards AI is suggested by Vishal Shah’s appointment, raising questions about balancing metaverse investment with AI’s potential across Meta’s platform and driving Reality Labs profitability.

Meta is set to unveil its advanced “Hypernova” smart glasses at its annual Connect event. Priced around $800, these glasses mark a step toward integrating displays into wearables, following previous collaborations with EssilorLuxottica. Analysts emphasize the need for Meta to demonstrate the return on investment for its Reality Labs, which has incurred substantial losses. While VR headsets face uncertain market traction, smart glasses are seen as a more promising avenue, with potential for AI integration. The success is crucial as Apple and Google also develop competing products.