Facebook expects to spend more than $10 billion on AR, VR and related hardware as well as the development of metaverse apps and services this year. CEO Mark Zuckerberg told investors during the company's Q3 earnings call Monday that the company will ramp up investment in the area, and warned that it won't see a return on that investment any time soon.
"I recognize the magnitude of this bet," Zuckerberg said. "This is not an investment that will be profitable for us any time in the near future."
Zuckerberg argued that Facebook had to build out a lot of fundamental technology first before it can rake in any meaningful returns with AR and VR. "Our goal is to help the metaverse reach a billion people," he said, adding that he hoped to reach that goal by the end of the decade. That's when it could also become "a real business story," Zuckerberg said.
"The metaverse will be a successor to the mobile internet," Zuckerberg said. "It will unlock a massively larger creative economy [...] than what exists today."
Facebook disclosed its massive spending on AR/VR hardware and related software and services in its Q3 earnings release: "We expect our investment in Facebook Reality Labs to reduce our overall operating profit in 2021 by approximately $10 billion," the company stated. "We are committed to bringing this long-term vision to life and we expect to increase our investments for the next several years."
Starting with Q4, Facebook will break out Facebook Reality Labs as a separate reporting segment in its quarterly earnings reports.
"As we have discussed, we are dedicating significant resources toward our augmented and virtual reality products and services, which are an important part of our work to develop the next generation of online social experiences," the company wrote Monday.
Altogether, Facebook generated $29 billion in revenue in Q3, compared to $21.5 billion during the same quarter last year. Earnings per share came in at $3.22, compared to $2.40 in Q3 of 2020. Analysts had expected earnings of $3.17 per share.
In addition to their focus on the metaverse, Facebook executives also highlighted a renewed effort to win back younger people with features like Reels, which has been heavily inspired by TikTok — a service that Zuckerberg called out as "one of the most effective competitors we have ever faced."
Update: This story was updated Oct. 25 with more details from the earnings call.