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Meta announced Q4 earnings yesterday, including $48.39 billion in revenue, up 21 percent year-over-year. This was driven by AI-fueled ad targeting, which has elevated its core business and marked a continued rebound from previous declines inflicted by iOS privacy restrictions.
Resting under those high-level Q4 results, Meta Reality Labs’ (MRL) revenue was $1.08 billion. This is up slightly year-over-year, and up 400 percent quarter-over-quarter. The former is the more apples-to-apples metric considering cyclical patterns throughout a given year (read: holidays).
But the real headline is that Q4 marks MRL’s biggest revenue quarter to date. That milestone is counterbalanced by the sobering reality that Q4 was also its most expensive quarter on record. The good news is that top-line revenue – a key VR demand signal – has reached new heights.
There’s much to be said about Meta’s broader positioning. But our main question today is how Q4 revenue translates to hardware unit sales. This is an exercise we’ve done every quarter for several years (see last quarter), which helps inform broader VR momentum and market sizing.
Reverse Engineering
Diving in, Reality Labs made $1.08 billion in Q4, 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 a flagship Quest headset anymore… but several devices 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 three 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 3: 39 percent
- Quest 3s: 26 percent
- Ray-Ban Meta Smart Glasses: 15 percent
Quest 3
Based on the above revenue shares, Quest 3’s estimated Q4 revenue was $421.2 million. Considering a Q4 average unit price of $549**, Meta sold an estimated 767,213 units during the quarter.
Quest 3s
Based on the above revenue shares, Quest 3s’ estimated Q4 revenue was $280.8 million. Considering a Q4 unit price of $319***, Meta sold an estimated 880,251 units during the quarter.
Ray-Ban Meta Smart Glasses
Based on the above revenue shares, RBMS estimated Q4 revenue was $162 million. Considering a Q4 unit price of $329 (and a revenue split with EssilorLuxottica), Meta sold an estimated 981,818 units during the quarter.
Grand Total
Adding up all devices, we get an estimated 2,629,282 units sold in Q4 – or 1,647,464 if considering just VR headsets.
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.
*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).
**During Q4, 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.
***During Q4, Quest 3s’ 128GB base model was $299 while the 256GB model was $349. This averages out to $319 given weighted sales at the lower end.
License to Invest
Stepping back, one factor that played into MRL’s strong Q4 was adoption accelerants. For example, there’s renewed VR demand given the novelty and mixed reality of Quest 3. Then there’s the breakout hit Ray Ban Meta Smartglasses, whose multimodal AI update boosted demand.
Quest 3s also deserves some credit for MRL’s Q4 revenue performance. In fact, Q4 was the device’s first full quarter in the market, and it came out of the gates at a giftable price point. This amplified the existing lift that consumer electronics often enjoy during the holiday quarter.
Another 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 3s is at the top of that list, followed by immersive entertainment devices (Vision Pro’s top-marketed use case) such as Xreal One. Put more simply and directly, Vision Pro could have a part in propelling Quest 3 and 3s sales. But in fairness, they’re reputable on their own merits.
But back to the elephant in the room, MRL’s record expenses reached $6.05 billion. This is up from the $4.7 billion spent in Q3. That’s a big jump but consider the corresponding 4x revenue jump. The headline here is astronomical losses as Meta invests in the future of computing.
To that end, it’s worth noting that performance in its core business gives Meta license to invest in the future. This wasn’t the case during the early-2022 ‘headwinds’ noted earlier. In other words, there’s less shade from Wall Street over Meta eating dessert without finishing its vegetables.
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