Mark Zuckerberg, CEO of Meta Platforms Inc., demonstrates Meta Quest Pro during the Meta Connect virtual event in New York, U.S., on Tuesday, Oct. 11, 2022.

Michael Nagle | Bloomberg | Getty Images

Mark Zuckerberg’s dream of a future in the metaverse is costing investors a lot of money.

In the earnings report after the bell on Wednesday, Meta said its Reality Labs division, which houses the company’s virtual reality technology and projects, reported an operating loss of $4.28 billion in the fourth quarter, bringing its 2022 total to $13.72 billion.

It’s been a tough first full year for the new Meta, the company formerly known as Facebook. In late 2021, Zuckerberg changed the company’s name and said its future would be in the metaverse, a digital universe where people would work, shop, play and learn.

But for now, it’s just a cost center, and Meta is still an online advertising company.

Reality Labs generated $727 million in the fourth quarter and $2.16 billion in revenue for the full year 2022. — down from $2.27 billion in 2021 — including Quest headset sales. In other words, the division lost more than six times the revenue it generated last year, while accounting for less than 2% of Meta’s total sales.

Analysts had expected Reality Labs to post a quarterly operating loss of $4.36 billion on revenue of $715.1 million, according to StreetAccount.

Sales of VR headsets in the U.S. were down 2% in 2022 from a year earlier as of early December, according to data shared with CNBC by research firm NPD Group.

In July, Meta announced that it was raising the price of its Quest 2 VR headset by $100. At the time, the company said the price increase was necessary to account for inflationary pressures. Meta then debuted its more expensive Quest Pro VR headset in October, pitching it to companies as an enterprise workplace device for $1,500. This week, Meta is running a sale on its high-end VR headset, slashing $400 for a limited time.

Zuckerberg told CNBC’s Jim Cramer last summer that he hopes to “get to about one billion people in the metaverse doing hundreds of dollars of commerce” by the second half of the decade.

But before the Facebook founder’s dreams can become a reality, Meta must spend many billions of dollars developing the VR and augmented reality technologies that underpin the metaverse concept.

The company said last year that it expects “Reality Labs’ operating losses in 2023 to increase significantly from the prior year.”

“After 2023, we expect to accelerate Reality Labs’ investments so that we can achieve our goal of growing the company’s total operating income over the long term,” Meta said at the time.

Shareholders aren’t all that thrilled with the results so far. Meta lost nearly two-thirds of its value last year as metaverse spending jumped and the company’s core online advertising business suffered from a struggling economy, increased competition from TikTok and of Apple privacy update, limit ad targeting.

On Wednesday, the company reported fourth-quarter results that beat analysts’ revenue estimates and announced a $40 billion buyback, sending shares up more than 17% in extended trading.

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