Apple’s Services division and Meta’s Reality Labs are reminders of how dominant Big Tech really is

This week, a number of Big Tech stocks reminded us just how dominant they really are. Yes, we used to balk at the thought of having a trillion-dollar company — now we have nine — but market valuations are only one way of contextualizing the sheer size of the BATMMAAN stocks.

Two divisions, both central to the future of their respective companies, Apple’s Services business and Meta’s Reality Labs division, offer another perspective.

Beyond the core

In its Q4 earnings, Apple revealed that, just as many reports had suggested, the latest AI-powered iPhone wasn’t proving as much of a pull for consumers as CEO Tim Cook would probably like, with sales down nearly 1% in its all-important holiday quarter. What is working at Apple, however, is its Services business, which clocked more than $26 billion in sales as the company topped 1 billion total subscriptions for things like Apple Music, TV+, iCloud, and more.

To put that figure in context, if Apple’s Services division were a stand-alone business, let’s call it iServe, it would be the 37th-largest company in the S&P 500 Index by revenue. It would be more than double the size of Netflix or Uber. It would be more lucrative than consumer goods giant Procter & Gamble, larger than Disney, and would even outmatch Tesla in terms of pure revenue.

Now, moving on to Meta...

Reality check

Back in 2014, Facebook made its two largest acquisitions ever in just around a month’s time. The first was messaging giant WhatsApp, and the other was a small VR headset startup called Oculus. For the latter's potential to “create the most social platform ever,” CEO Mark Zuckerberg shelled out $2 billion.

That seemed like a lot of money at the time.

But since Facebook became Meta, Reality Labs, the augmented and virtual reality arm which expanded from Oculus, has lost the company a total of ~$60 billion since 2020.

To put that number in context, we’ll use Boeing, a company that’s been plagued by safety issues, union battles, scandals, and management change, and has reported six straight years of net losses. The sum total of those losses? A mere $35.7 billion — still 40% less cash than Reality Labs has burned through.

Of course, Meta can afford to blow $60 billion on Reality Labs, as its “Family of Apps” division reported more than $260 billion in profit over the same period.

An obvious follow-up question: is Zuck’s “long-term investment” worth the burn? Well, on the plus side, Meta does continue to lead the VR/AR market with a 70% share, with the social media giant selling 3 million units of its latest Quest 3 through the first three quarters of the device’s launch, way ahead of Apple’s Vision Pro. 

Indeed, Meta’s leadership seems as keen as ever to pour cash into the business this year, with the company reportedly integrating Reality Labs more closely with its core functions and vowing 2025 will be “a pivotal year for the metaverse.” Meta is expected to spend $65 billion on capex in this year alone, thanks to the company’s cash-intensive AI ambitions.