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Meta Stock Falls Amid AR Struggles

mark zuckerberg AR
By Luigi Savarese
Luigi Savarese

2 Min

July 28, 2023
  • Layoffs and the success of Reels drove Meta's revenue growth in the second quarter of 2023.
  • Meta's Reality Labs division, responsible for VR and AR products, struggles.
  • Meta hopes its upcoming Quest 3 headset, retailing for $499, will be more successful than its previous VR headsets.

Meta Platforms had one of its best quarters since before it changed its name from Facebook. The company reported 11% year-over-year revenue growth, which is a sigh of relief for investors. Is it because of the Meta AR division? Not at all! This growth is due in part to layoffs and the success of Reels. Meta Stock price reflects this. Although Meta stock experienced a decline in 2022, it has since rebounded and is now trading at approximately $298 per share as of today's market close.

Meta laid off more than 20,000 employees in the first half of 2022, which has helped to reduce personnel costs. This "Year of Efficiency" has also led to a focus on more profitable products, such as Reels. Reels, a short-form video format that is similar to TikTok, has hit 200 billion daily plays across Instagram and Facebook. This has helped to offset the decline in user growth on Facebook's core platform.

Despite the revenue growth, Meta's Reality Labs division, which is responsible for virtual reality (VR) and augmented reality (AR) products, continues to struggle. Reality Labs lost $3.7 billion in the second quarter of 2023, and Meta CFO Susan Li expects the losses to get even larger in the future.

The general public still seems uninterested in Meta's vision for a metaverse, and Apple's recent entry into the AR market with its $3,499 Vision Pro headset has not helped matters. However, Meta is hoping that its upcoming Quest 3 headset, which will retail for $499, will be more successful.

Only time will tell whether Meta's investments in AR will pay off. However, for now, the company's revenue growth is being driven by layoffs and the success of Reels.

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