Meta recently released its earnings report for the third quarter of 2025, revealing mixed results for the tech giant. While the company achieved a robust $56 billion in revenue, marking a 26 percent increase year-over-year, its Reality Labs division, responsible for VR headsets and AI glasses, faced substantial operating losses.
Meta’s Reality Labs: A Deep Dive into the Losses
The Reality Labs division recorded a significant loss of $4.4 billion during Q3 2025. This unit is at the forefront of developing Meta’s Quest VR headsets and its Ray-Ban and Oakley-branded AI-powered smart glasses. What’s particularly striking is that these losses occurred despite strong sales performance from Meta’s AI glasses.
Delving deeper into the numbers, Reality Labs managed to generate $470 million in sales for the third quarter, a notable 74 percent increase compared to $270 million in the same period last year. However, this growth in revenue was overshadowed by the hefty operating losses.
Reports indicate that since late 2020, Meta’s Reality Labs has accumulated over $70 billion in total losses, making it one of the company’s least profitable ventures. Industry analysts attribute these considerable expenditures to the high development and production costs associated with cutting-edge augmented reality (AR) and virtual reality (VR) technologies.
During the recent earnings call, Meta CEO Mark Zuckerberg highlighted the strong performance of AI glasses revenue in Q3. This suggests that the majority of the division’s losses are tied to the expenditures for Quest-branded VR headsets, even though these headsets also performed better than anticipated.
Zuckerberg explained, “The significant year-over-year growth in Q3 was partly due to retail partners stocking up on Quest headsets ahead of the holiday season. We did not have a similar benefit in the third quarter of last year since our Quest 3S headset launched in the fourth quarter of 2024.”
Looking ahead, Meta’s outlook for Reality Labs in the upcoming quarter remains cautious. Meta’s Chief Financial Officer, Susan Li, stated during an analyst Q&A, “We expect that Q4 Reality Labs revenue will be lower than last year for a couple of reasons that I alluded to. The biggest factor is we’re lapping the introduction of Quest 3S in Q4 of last year, and we don’t have a new headset in the market this year.” This indicates that the company anticipates continued financial challenges for its metaverse-focused division in the near term.