Meta Reality Check: Inside the $45 Billion Cash Burn at Reality Labs
Meta's Reality Labs division, dedicated to augmented reality (AR), virtual reality (VR), and the metaverse, has incurred staggering losses amounting to $45 billion over just four years. This financial strain is comparable to the combined market values of Snap (SNAP) and Pinterest (PINS).
According to insiders interviewed by Yahoo Finance, the substantial cash burn is not just due to the costs of innovation but is also attributed to a "chaotic" internal culture. This environment is characterized by frequent reorganizations and the appointment of leaders lacking expertise in AR or VR. Meta CEO Mark Zuckerberg has warned that operating losses at Reality Labs will continue to escalate significantly.
Yahoo Finance's interviews with a dozen former high-level employees, including executives and managers across engineering, research, product management, hardware, content, and operating systems, reveal that a lack of clear vision and mismanagement are the primary reasons behind Reality Labs' financial troubles. Many former employees left due to internal discord, while some were affected by structural layoffs. They requested anonymity due to nondisclosure agreements and concerns about future job prospects.
Meta has not responded to Yahoo Finance's requests for comment on these issues.
Investors are increasingly questioning how Reality Labs' multibillion-dollar expenditures align with Zuckerberg's promise of an "Year of Efficiency" for Meta. Despite implementing cost-cutting measures and reducing spending in Q1 2023, Meta's shares dropped by 20% following its latest earnings report, due to a significant increase in AI investment.
As Zuckerberg resumes substantial spending, concerns are growing over the company's ability to support both his AI pivot and Reality Labs' ongoing losses. While analysts and investors have maintained patience regarding the long-term potential of AR and VR, the sustainability of this patience, which has lasted over a decade, is now being challenged.
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