David Jagielski, The Motley Fool

Wed, Jun 25, 2025, 6:00 PM5 min read

• Meta Platforms' losses on its Reality Labs division have continually risen over the years.

• The company has invested aggressively into the metaverse without any clear payoff.

• Now, the company is also spending heavily on artificial intelligence.

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Meta Platforms (NASDAQ: META) has diversified its business over the years. No longer is it just a social media company; it's expanded into artificial intelligence (AI) and of course, the metaverse, and it even changed its name to highlight its focus on that latter opportunity.

While Meta Platforms has piled a lot of resources into the metaverse and its Reality Labs division, the payoff simply hasn't been there, and it's questionable whether it ever will be. Recently, the Reality Labs division hit a milestone, which is more indicative of what kind of money pit it has become rather than terrific growth opportunity.

If you've been following Meta's performance in recent years, you've likely seen the continual losses from the Reality Labs business, normally totaling multiple billions of dollars per quarter. But with strong revenue growth from advertising and its social media platforms continuing, investors have largely ignored that unattractive part of its financials.

In its most recent quarter, however, the operating losses from Reality Labs reached a cumulative total of more than $60 billion. It's a staggering amount that the company has incurred on the business since first reporting on the new segment back in 2021.

Source: Company filings. Table by author.

That adds up to $62 billion. And what's noteworthy is that the losses have been increasing over the years.

Through the first three months of 2025, Meta grew its profits by 35% to $16.6 billion. Its Family of Apps segment, which includes its core social media assets such as WhatsApp and Facebook, generated an operating profit of nearly $21.8 billion, which easily covered the losses from Reality Labs.

While that has masked the issue thus far, there are a couple of reasons why this is worrisome.

The first and most obvious one is that eventually this advertising-fueled revenue growth will slow down. If economic conditions slow down, companies are likely to cut back on ad spend. As the growth rate slows and Meta's earnings don't look as impressive anymore, it'll only be a matter of time before more attention is paid to that troubling Reality Labs business. Investors may become more demanding of a payoff from that investment sooner rather than later, and that could lead to a sharp decline in the share price.