Meta's eyewear business is experiencing a world of ups and downs. Where will the future growth points be?

Recently, Meta released its financial report for the first quarter of fiscal year 2025. Its eyewear business presented two completely different trends, which has drawn widespread attention from the industry. On the one hand, the sales of VR glasses have declined, seriously dragging down the revenue of the Reality Labs department. On the other hand, Ray-Ban Meta AI smart glasses have achieved remarkable results, with a significant increase in the number of monthly active users. What business logic and market trends lie behind this sharp contrast between the cold and the hot?

According to the financial report data, the Reality Labs department (referred to as RL), which is responsible for the AI/AR/VR glasses business, had revenue of 412 million US dollars in the first quarter of 2025, a year-on-year decrease of 6.4%. This was the first year-on-year negative growth since 2024. Meta's Chief Financial Officer Susan Lee clearly pointed out that the decline in revenue was due to the drop in sales of Meta Quest. However, the increase in sales of Ray-Ban Meta AI glasses offset some of the losses to a certain extent. Data shows that the department suffered a loss of 4.21 billion US dollars in the first quarter, with an expenditure of 4.622 billion US dollars. The revenue-expenditure ratio was only 9%, a decrease of 1 percentage point compared with the same period last year. The financial pressure is evident.

In terms of VR glasses, the Meta Quest series, which was once highly anticipated by Meta, performed poorly. Although the Meta game director previously disclosed that the monthly usage of Quest has increased and the retention rate of Quest 3 is also higher than that of the previous generation product, the decline in market sales still poses severe challenges for it. From the perspective of the market environment, the overall development of the VR industry is facing bottlenecks. The content ecosystem is not rich enough, and user stickiness is difficult to be continuously improved. Moreover, VR devices have problems such as poor wearing comfort and high prices, which leads to a decrease in consumers' purchasing intention. In addition, the instability of the global supply chain, such as the shortage of core material yttrium oxide, has also forced Meta to reduce production of virtual reality devices, further affecting the market supply and sales of the Quest series.

In contrast, Ray-Ban Meta AI smart glasses have shone brightly in the market. Its monthly active users have increased by more than four times year-on-year, and its sales have also achieved a significant growth. In the past year, its sales have increased by two times. The factors contributing to the success of Ray-Ban Meta AI smart glasses are multi-faceted. In terms of product design, it perfectly integrates fashion and technology, meeting consumers' dual demands for both aesthetics and practicality. In terms of price, it is priced at 299 US dollars overseas, which is relatively affordable. Compared with heavy and expensive AR/VR head-mounted display devices, it has a significant price advantage, allowing consumers to wear it without any burden in their daily lives. Functionally, AI functions have practical collaborative significance. For instance, voice command operations are convenient and fast. Additionally, a real-time translation function has been added, covering English, French, Italian and Spanish, which greatly expands the usage scenarios and user groups.

From the perspective of market prospects, although the VR glasses market is currently facing difficulties, Meta has not given up on this field. VR technology still has huge application potential in fields such as gaming, education, and healthcare. With the continuous advancement of technology, such as improved display effects, enhanced wearing comfort, and enriched content ecosystems, it is still possible to witness new growth in the future. The market of AI smart glasses is in a period of rapid growth. Counterpoint Research predicts that driven by a wider range of application scenarios, diversified price ranges and an expanding player ecosystem, AI glasses will experience a period of rapid growth between 2025 and 2030. Meta has taken the leading position in the market with the first-mover advantage of Ray-Ban Meta AI smart glasses. However, the entry of many brands, such as Baidu, Rokid, and Thunderbird, has also made the competition increasingly fierce.

Meta's CEO Mark Zuckerberg said that the company plans to increase investment in the smart glasses sector and will launch a brand-new smart glasses product later this year. This indicates that Meta has recognized the huge potential of AI smart glasses and is actively making plans to consolidate its market position. Meanwhile, Meta's strong advertising business provides financial support for the continuous investment in its eyewear business, enabling it to withstand the losses of the Reality Labs department in the short term and adhere to the long-term technological research and development and market cultivation strategy.

The stark contrast between the ups and downs of Meta's glasses business is a microcosm of the current development of the smart wearable device market. The VR glasses business needs to break through the technical and content bottlenecks and reinvigorate the market vitality. AI smart glasses need to maintain their advantages while constantly innovating to cope with competition. For Meta, how to balance the development of the two and allocate resources reasonably will be the key to its success or failure in the future smart wearable field.