Meta still wants to have its iPhone moment

Last quarter, Meta’s revenue from its Reality Labs segment, which includes its AI smart glasses, was higher than analysts predicted and its losses were lower. Those losses relative to revenue were still massive — nearly 10x what it was bringing in — with the company posting an operating loss of $4.4 billion on revenue of $470 million.

Meta has a couple of things that it’s great at and plenty of other things that it’s merely good at. Gadgets, at least so far, ain’t one of them. So, why hasn’t the company cut bait and moved on?

Since the company started reporting those losses in late 2020, it’s totaled more than $73 billion.

For Meta, the expense is worth it, as CEO Mark Zuckerberg believes the segment plays a key role in the company’s future. To put it simply, Meta doesn’t want to miss its iPhone moment again.

“Certainly, the investment here is not just to build just the device. It’s also to build these services on top,” Zuckerberg replied to a question during Meta’s earnings call last week. “Right now, a lot of people get the devices for a range of things that don’t even include the AI even though they like the AI. But I think over time, the AI is going to become the main thing that people are using them for and I think that that’s going to end up having a big business opportunity by itself.”

In other words, Meta isn’t just betting on selling hardware. It’s betting that its AI services built on top of those devices will generate a new stream of revenue — much like Apple’s ecosystem of services layered on the iPhone.

The Takeaway

Here, Meta — which (as Facebook) once tried and failed to build its own smartphone — is hoping history will rhyme rather than repeat. The difference this time is that Meta wants to own both the devices and the software that runs on them.

Like Apple, which has turned its Services segment into a reliable profit engine even as hardware sales have wobbled, Meta wants to ride that same train: hardware as a gateway, software as the payoff.