Tasting the AI Sweet Spot, Meta Restructures Reality Labs
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Tasting the AI Sweet Spot, Meta Restructures Reality Labs
Andrew Bosworthy has declared his intention to "build the entire Meta with artificial intelligence."
Navigating Web3 tides with focused insightsBy Mu Mu
Reality Labs' ongoing losses have made Meta's metaverse journey even harder than SpaceX's mission to Mars, and sweeping reforms continue.
Recently, Meta announced a major restructuring of Reality Labs, its division responsible for the metaverse and virtual reality businesses, splitting it into two separate units: one focused on the "metaverse" and another on "wearables." Future plans are now divided accordingly: the metaverse unit will focus on developing Quest-series VR headsets, while the wearables unit will concentrate on smart glasses.
The restructured Meta has elevated the strategic importance of wearables within the company. CTO Andrew Bosworth emphasized that the Ray-Ban Meta smart glasses have received strong market response, calling their success "much greater than expected."
The sales performance of this smart glasses product has shown Meta how AI can enhance XR hardware. Having tasted early success, Meta quickly integrated AI initiatives into Reality Labs' structure, hoping that new AI-powered hardware development can reverse the division’s financial losses.
Reality Labs Adds Wearables Business
Meta’s metaverse division, Reality Labs, has reported “consecutive quarterly losses.” In Q1 of this year, despite a 30% year-on-year revenue increase, it still posted a loss of $3.85 billion—up from $3.5 billion in the previous quarter. Estimates suggest that since 2019, Reality Labs has accumulated over $50 billion in losses (approximately 350 billion RMB).
These persistent losses have cast a shadow over Meta's metaverse ambitions, creating internal operational pressure and drawing skepticism from shareholders, as well as public ridicule toward Zuckerberg’s metaverse dream.
Despite continuous layoffs, reform efforts at Reality Labs continue. The division is undergoing a significant reorganization, splitting into two parts: a “metaverse” team handling the Quest headset line, the Horizon social platform, and related technologies; and a “wearables” team managing Meta’s other software and hardware products, including the Ray-Ban collaboration smart glasses.
This marks the largest-scale restructuring at Meta since its rebranding in 2020.
In an internal memo to employees, Meta CTO Andrew Bosworth outlined the purpose of the restructuring: the company remains committed to MR and the metaverse, aiming to create more integrated product experiences through Meta AI.
Excerpt from Meta internal memo
As seen in Bosworth’s memo, keywords include smart glasses, wearables, and AI—while traditional Reality Labs offerings like the Quest headset series and Horizon metaverse platform are no longer highlighted.
The shift reflects reality: shipment forecasts for the next-generation Meta MR headset, Quest 3, have already been downgraded.
In October last year, Kuo Ming-chi, a TF International Securities analyst covering XR hardware markets, noted that initial 2023 shipment estimates for Quest 3 were over 7 million units. However, due to weaker-than-expected demand, the forecast was revised down to 2–2.5 million units for 2023, with only about 1 million units projected for 2024.
Faced with these realities, Meta must find a new path forward for Reality Labs. Zuckerberg himself admitted that the metaverse vision is so vast that he expects Reality Labs won’t turn a profit until 2030, describing the current operations as a “long-term investment in future planning.”
Now, by adding wearables as a new business line under Reality Labs, Meta is betting on the potential profitability unlocked by AI-powered smart hardware. As Bosworth revealed in the memo, the Ray-Ban Meta smart glasses have generated strong market enthusiasm—“far more successful than anticipated.”
This means revenue from this new hardware could directly reduce Reality Labs’ losses.
AI Features Drive Sales of Meta’s New Hardware
“Wearables” aren’t new, but when paired with “smart,” AI’s role in enhancing device functionality becomes critical. The strong sales of the Ray-Ban Meta smart glasses, mentioned by Bosworth, owe much to AI integration.
The first-generation Ray-Ban Stories launched in September 2021 had sold only 300,000 units by February 2023, with just 27,000 monthly active users—less than 10% of total sales.
However, after deeper collaboration with Meta, the Ray-Ban Meta glasses debuted alongside the Meta Quest 3 VR headset in September 2023. In just Q4 2023, shipments surpassed 300,000 pairs—nearly matching the lifetime sales of the first generation. Foreign media outlet The Verge estimated total sales may have already exceeded 1 million units.
Meanwhile, the co-launched Meta Quest 3 underperformed. RoadToVR analyzed Amazon sales data during the Black Friday period (a one-month window) and found combined Quest 2 and Quest 3 sales totaled around 240,000 units, with Quest 2 accounting for 70.2%—significantly outpacing Quest 3.
Meta acknowledged in a blog post that Ray-Ban Meta achieved “better-than-expected market performance,” stating that “the glasses are selling faster than we can produce them.” The team is now working to launch additional styles.
Ray-Ban Meta smart glasses appearance
Compared to the first generation, Ray-Ban Meta shows almost no visible changes externally. Yet this turnaround was largely powered by AI.
Hardware-wise, Ray-Ban Meta received comprehensive upgrades—cameras, storage, speakers, microphones, battery life, and weight reduction.
But beyond hardware optimization, the real breakthrough came from AI features introduced in April 2023. The “Hey Meta” voice command activates the AI assistant, enabling object recognition, real-time translation, weather inquiries, and more.
Meta is using an “+AI” strategy to sustain its metaverse ambitions. It’s not just about Ray-Ban Meta smart glasses. On June 2, Meta also restructured its entire AI organization, merging the former Facebook AI Research lab (FAIR) into Reality Labs.
FAIR is one of the most prominent AI research labs globally, founded in 2013 by deep learning pioneer Yann LeCun (creator of convolutional neural networks and Turing Award winner). Its influence in deep learning frameworks spans the entire ecosystem.
If XR hardware serves as the body enabling human entry into the metaverse, then AI is the brain. By integrating FAIR—the AI research powerhouse—into Reality Labs, Meta not only aligns its hardware development with the AI trend but also directly infuses intelligence into its virtual reality devices.
Andrew Bosworth has already declared his intent: “to build all of Meta with artificial intelligence.”
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