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

But 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.

Here’s how Zuckerberg explained his thinking, when Truist analyst Youssef Squali asked on the earnings call last week about how Meta would recoup its sizable hardware investments (emphasis ours):

“...the work that on Ray-Ban Meta and the Oakley Meta product is going very well. I mean, at some point, if these continue going as well as it has been, then I think it will be a very profitable investment. I think that there’s some revenue that we get from basically selling the devices and then some that will come from additional services from the AI on top of it. So I think that there’s a big opportunity.

Certainly, the investment here is not just to build just the device. It’s also to build these services on top. 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.

But as products like the Ray-Ban Meta and Oakley Metas are growing, we’re also going to keep on investing in things like the more full field of view, product form of the Orion prototype that we showed at Connect last year. So those things are obviously earlier in their curve toward getting to being a sustaining business. And our general view is that we want to build these out to reach many hundreds of millions or billions of people, and that’s the point at which we think that this is going to be just an extremely profitable business.”

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.

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.

But there’s a big assumption baked in: that the same technological arc will play out again. What if AI finds a completely different kind of platform? What if smart glasses aren’t the “ideal form factor” for AI? What if the real action stays on the phone — or moves somewhere else entirely, into assistants and ambient interfaces untethered from consumer hardware? What if AI is a bubble or isn’t the future everyone wants?

Guess we’ll find out.