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As you may have heard, Meta announced Q2 earnings last week. It had a strong quarter with $39.07 billion in revenue, up 21 percent year-over-year. This was driven by AI integrations in ad targeting, replacing its previous and troubled (and now restricted) behavioral targeting.
Resting under those high-level results, Meta Reality Labs’ (MRL) revenue was $350 million. This is up 28 percent year-over-year, but down 25 percent quarter-over-quarter. The former is the more apples-to-apples metric considering cyclical sales patterns throughout a given year.
Speaking of sales patterns, Q2 year-over-year growth can also be attributed to MRL underperformance in 2023. That represented the waning stages of Quest 2’s lifecycle. Similarly, Q2 2024’s growth is propelled by Quest 3’s traction, along with Ray-Ban Meta Smartglasses.
There’s a lot to be said about that timing and market positioning. But our main question today is how Q2 revenue translates to headset unit sales. This is an exercise we’ve done every quarter for several years, which helps inform broader VR momentum and market sizing.
Data Dive
Diving in, Reality Labs made $350 million in Q2, as noted. As done in the past, we can use this figure to reverse-engineer unit sales. This exercise gets harder and harder every year due to more revenue sources. It’s not just Quest 1 & 2 anymore… but several headsets in the mix.
To that end, we’ve estimated Meta Reality Labs’ revenue share breakdowns based on several signals we’re tracking. You can see those share estimates below. In this hardware-centric exercise, we’ll focus on the last four bullets, which account for 80 percent of MRL revenue.
- VR software (game & app sales): 18 percent*
- First-party accessories (head straps, etc): 2 percent
- Quest 2: 5 percent
- Quest 3: 62 percent
- Quest Pro: 1 percent
- Ray-Ban Meta Smart Glasses: 12 percent
Quest 2
Based on the above revenue shares, Quest 2’s estimated Q2 revenue was $17.5 million. Considering a Q2 average unit price of $200**, Meta sold an estimated 87,500 units during the quarter.
Quest 3
Based on the above revenue shares, Quest 3’s estimated Q2 revenue was $217 million. Considering a Q2 average unit price of $549***, Meta sold an estimated 395,264 units during the quarter.
Quest Pro
Based on the above revenue shares, Quest Pro’s estimated Q2 revenue was $3.5 million. Considering a Q2 unit price of $999, Meta sold an estimated 3,504 units during the quarter.
Ray-Ban Meta Smart Glasses
Based on the above revenue shares, RBMS estimated Q2 revenue was $42 million. Considering a Q2 unit price of $329, Meta sold an estimated 127,660 units during the quarter.
Grand Total
Adding up all headsets, we get an estimated 613,927 units sold in Q2 – or 486,268 if considering just VR headsets.
*This figure represents the Oculus Store’s gross revenue, before developer payouts, which are usually 70 percent after taxes. Meta realizes 100 percent of revenue in some cases, such as first-party titles and releases from VR game studios it has acquired (e.g., Beat Games).
**Quest 2 went out of stock in June, meaning there was two months of sales in Q2, during which the device sold at a highly-discounted $200.
***During Q2, Quest 3’s 128GB base model was $499.99 while the 512GB model was $649.99. This averages out to $549, given weighted sales at the lower end.
License to Invest
So there you have it. Of course, much of this exercise is based on the above-estimated revenue shares across Meta Reality Labs’ commercial products. Those share estimates are educated but up for debate: anyone can adjust them and calculate accordingly using the above model.
We should also address the elephant in the room: Meta Reality Labs’ ongoing expenses. They reached $4.84 billion, which is substantial but an improvement from the record $5.72 billion in Q4. The headline here is astronomical losses as Meta invests in the future of computing.
The other factor that plays into the above figures is Meta’s XR adoption accelerants. The first was already noted: renewed VR demand given the novelty, performance, and value of Quest 3. The same can be said for the breakout-hit Ray Ban Meta Smartglasses, now with multimodal AI.
The second accelerant sits down the road in Cupertino: Vision Pro. Apple tends to mainstream entire product categories when it enters markets. In Vision Pro’s case, this halo effect boosts mixed-reality demand and could buoy competitive devices with drastically lower price tags.
Quest 3 is at the top of that list, followed by immersive entertainment devices (Vision Pro’s top-marketed use case) such as Xreal Air 2. Put more simply and directly, Vision Pro could have a part in propelling Quest 3 sales. But in fairness, Quest 3 is reputable on its own merits.
In that sense, Meta has validated strong demand and turned things around from last year. Meanwhile, performance in its core business gives it more license to invest in the future. In other words, there’s less handwringing on Wall Street over MRL spending than there was last year.
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