Given how large Metas reality lab losses are, i think we should put special emphasis on thinking about and modeling them. In 2023 Meta Platforms had losses of $6.13 per share in reality labs alone.
This hidden earnings power has always been an important part of the Meta thesis.
In their Q1 2024 quarterly report Meta projects increasing losses.
For Reality Labs, we continue to expect operating losses to increase meaningfully
year-over-year due to our ongoing product development efforts and our investments to further scale our ecosystem.
That said a recent report hints to significant cost cuts for reality labs hardware.
https://forum.investmentwiki.org/t/meta-platforms-news/76/136?u=moritz
Assessment
If I had to guess I would think that Meta is indeed cutting back on VR costs as Apple’s Vision is failing to build significant traction and Apple is scale back it’s original goals.
That said I believe it is prudent for us to still model increasing reality labs losses as budgets likely shift to AI spent.
More detailed work on that front needs to be done by us in the future esp to understand which parts of AI costs are under reality labs and which under R&D.
In addition we should try to project capex which includes investments into AI infrastructure.