Meta’s cost-cutting efforts at its metaverse division, Reality Labs, could help save the company $3 billion, Bank of America analysts said Friday.
Meta is reportedly cutting the budget for its Reality Labs hardware division, which makes its VR headsets, by about 20% between this year and 2026, The Information reported Thursday, citing unnamed sources. That doesn’t mean the company is halting its virtual and augmented reality innovations: the company is planning to release new Quest headsets and AR glasses in the next three years, the outlet said. The cost-cutting at Reality Labs is instead meant to put the division’s seemingly out of control spending under lock.
While Bank of America’s Justin Post and Nitin Bansal said in a research note Friday that Meta could save an estimated $3 billion, they added that some of those cost savings could be reallocated to Meta’s AI efforts. But those efforts are also being put on hold in some regions (i.e. the European Union and Brazil) as Meta looks to avoid growing regulatory scrutiny in the AI space. Meta’s plans for AI and virtual reality will likely come into clearer focus when the Facebook and Instagram parent reports its second quarter earnings on July 31.
Meta CEO Mark Zuckerberg has repeatedly reiterated his belief that the capital-m Metaverse is the future. “We continue making steady progress building the metaverse as well,” he said in a call with investors in March, discussing the company’s first quarter financial results. In the same breath, Meta reported a loss of $3.8 billion for its Reality Labs division.
The company’s VR and AR efforts are surely still a money-loser for Meta, but Reality Labs is at least finding ways to shrink its losses — which fell 17% between the last three months of 2023 and the first quarter of 2024.
Bank of America analysts maintained their buy rating of Meta’s stock on Friday. They see shares rising nearly 15% to $550 over the next year.
By the numbers
$55 billion: How much Meta’s Reality Labs has lost the company since 2019
30%: How much first quarter sales for Reality Labs, which totaled $440 million, rose from last year
$3 billion: How much Meta could save with new cost-cutting measures at Reality Labs
14.8%: How much Bank of America analysts see Meta’s share price rising over the next year — from $479 to $550
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