- Facebook will soon disclose how much revenue Oculus and other AR/VR efforts generated last year.
- Wall Street is expecting a number close to $3 billion, up more than 50% from a year earlier.
- “They’ve learned from other companies you can start to trade on a growth number,” one investor said.
Facebook will soon reveal the financial results of its early metaverse work, and Wall Street is trying to keep expectations realistic.
When the social-media company reports earnings Feb. 2, it will disclose the performance of a new business for the first time: Reality Labs. This division, led by new CTO Andrew Bosworth, includes sales of Oculus headsets and other AR/VR hardware and related software and content. It will sit alongside the company’s Family of Apps segment, which houses Facebook, Instagram, WhatsApp and Messenger, and generates the ad revenue that accounts for nearly all of Facebook’s business.
The company, now called Meta, is taking another page from Google’s playbook. The internet giant created a new Alphabet parent company in 2015 and soon began reporting revenue and other numbers on its Search business and other faster-growing divisions such as YouTube. That extra clarity sparked a surge in Alphabet shares.
Facebook is now in a similar position. With waning adoption of its core apps and a new focus on the metaverse, a 3D version of its platforms accessed through AR/VR hardware and other tech, the company is eager to focus on its growth prospects.
“It comes down to isolating different segments within the business to show the Street something it can get excited about,” said Dan Morgan, a vice president of Synovus Trust. “Even if it’s not a big number in terms of percentage of the business, they’ve learned from other companies that you can start to trade on a growth number.”
Reality Labs revenue should come in around $2.7 billion for of 2021, Morgan estimates. Mark Mahaney, a top internet analyst at Evercore ISI, expects Reality Labs revenue to be around $2.8 billion for that year, up from $1.8 billion in 2020 for a growth rate of more than 50%.
Given increased sales of the Oculus headset over this past holiday season, the 2021 estimate may turn out to be “a bit low,” Mahaney admitted. International Data Corp. estimated that Facebook sold as many as 6.8 million VR headsets last year, up from an estimated 3.5 million the year before. It holds more than half of the headset market right now.
“Oculus has single handedly driven growth in the market,” Jitesh Ubrani, a research manager for IDC, wrote in a report.
By 2022, Mahaney said, revenue for Reality Labs will be around $3.3 billion, or roughly 2% of the company’s total business. By 2025, it’s possible the segment will reach 5% of the total, so in excess of $5 billion. It will likely be 2030 before Reality Labs comprises 10% of the business, the level at which most companies start breaking down more of what goes into a segment’s revenue. The analyst gave that 50/50 odds.
“So far, the use cases are almost entirely gaming and it’s unclear whether they will expand dramatically,” Mahaney said. “But there is clearly interest and the company should be investing in it.”