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Meta announced Q3 earnings last week, including $51.24 billion in revenue, up 26 percent year-over-year. Revenue performance continues to be driven by AI-fueled ad targeting. This is a powerful revenue driver but also a costly one, given escalating AI operating expenses.
Resting under those high-level Q3 results, Meta Reality Labs’ (MRL) revenue was $470 million. This was up 74 percent year-over-year, and 27 percent quarter-over-quarter. The former is the more apples-to-apples metric, considering cyclical patterns in a given year (e.g., holidays).
Strong MRL growth was driven by Ray-Ban Meta Smartglasses (RBMS), which had tripled in year-over-year sales in Q2, as revealed in Essilor Luxottica’s disclosures at that time. The bad news is that Quest headset year-over-year sales growth is slowing, often offsetting RBMS growth.
There’s much to say about all these dynamics (more in a bit). But our main question is how Q3 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, MRL’s top-line revenue was $470 million in Q3, as noted. As done in the past, we can use this to reverse-engineer unit sales. This exercise gets harder every year due to more revenue sources. It’s not just one 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 estimates below (in dollars, not units). In this hardware-centric exercise, we’ll focus on the last four bullets, which account for 80 percent of revenue.
- VR software (game & app sales): 18 percent*
- First-party accessories (head straps, etc): 2 percent
- Meta Ray-Ban Display Glasses: 0 percent (not sold in Q3)
- Oakley Vanguard: 0 percent (not sold in Q3)
- Quest 3: 24 percent
- Quest 3s: 19 percent
- Ray-Ban Meta Smart Glasses: 28 percent
- Oakley HSTN: 9 Percent
Quest 3
Based on the above revenue shares, Quest 3’s estimated Q3 revenue was $112.8 million. Considering a Q3 average unit price of $499**, Meta sold an estimated 226,052 units during the quarter.
Quest 3s
Based on the above revenue shares, Quest 3s’ estimated Q3 revenue was $89.3 million. Considering a Q3 average unit price of $329***, Meta sold an estimated 271,429 units during the quarter.
Ray-Ban Meta Smart Glasses
Based on the above revenue shares, RBMS estimated Q3 revenue was $131.6 million. Considering a Q3 average unit price of $329 (and a revenue split with EssilorLuxottica), 792,771 units were sold during the quarter.
Oakley HSTN
Based on the above revenue shares, HSTN’s estimated Q3 revenue was $42.3 million. Considering a Q3 average unit price of $429 (and a revenue split with EssilorLuxottica), 196,744 units were sold during the quarter.
Grand Total
Adding up all devices, we get an estimated 1,486,996 units sold in Q3. That consists of 989,515 smart glasses and 497,481 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 Q3, Quest 3’s 512GB model was priced at $499.99 – the single active price during the quarter.
***During Q3, Quest 3s’ 128GB base model was $299 while the 256GB model was $399. This averages out to $329 given weighted sales at the lower end.
XR’s Rich Uncle
Stepping back, smart glasses are growing rapidly, but offset to a degree by declines (or flat growth in some quarters) for VR. That offset is impactful due to price tags: Unit sales growth in smart glasses has a smaller overall revenue impact than declines in higher-priced VR headsets.
Meanwhile, one thing missing from all the above is Meta Ray-Ban Display Glasses (MRBDG). And that’s for good reason, as sales of the device started in Q4. So we’ll get to see those results in three months. Based on early reviews and signs of traction, sales impact could be moderate.
Add it all up, and the headline is that non-display AI glasses are the growth engine. Meta will continue to internalize these demand signals and course correct its road map accordingly. Rumors have already surfaced about delayed Quest 4 development to focus on AR glasses.
That includes non-display AI glasses (RBMS), flat-AR display glasses (MRBDG), and the longer-term holy grail: dimensional AR glasses (Orion). This is Meta’s AR spectrum and its leaning into the art of the possible for each, timed as the underlying tech reaches points of viability.
This is Meta’s message to the market as MRL endures massive losses. The division remains massively in the red with a $4.4 billion Q3 net loss. Fortunately, its core business is thriving to the point that the message is working. Put another way, Meta’s ad business is XR’s rich uncle.
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