Meta Platforms’ strategic turn toward artificial intelligence and smart glasses is accompanied not only by Meta VR losses, but also by rising financial and legal risks. These challenges are beginning to create a new area of uncertainty for the company’s business.
The recent 10% staff reduction at Reality Labs was part of a larger Meta effort to align costs with the actual pace of commercial adoption of VR technologies. Since the end of 2020, this area has led to the company’s cumulative losses exceeding $70 billion, and, as Meta Chief Technology Officer Andrew Bosworth acknowledged, the market growth rate has been significantly lower than initial expectations. As a result, the company closed several VR studios, curtailed development of individual game projects, and abandoned corporate products, focusing resources on mobile versions of the metaverse and smart glasses, which offer higher returns on investment.
Against this backdrop, American stock indices, particularly the Dow Jones Industrial Average, which includes Meta as one of its largest technology constituents, also came under pressure. The market perceives the cost reduction at Reality Labs as a step toward improving operational discipline; however, the growth of legal risks and uncertainty surrounding the long-term monetization of new products increases share price volatility.
As a result, the technology sector’s contribution to the Dow Jones’ dynamics is becoming less predictable, and the index itself is increasingly responding not so much to macro statistics as to corporate news and potential financial liabilities of large issuers.Â
Market statistics also confirm the financial logic of such a reversal. According to IDC, Meta VR losses are reflected in shipments of classic VR devices, which decreased by almost 43% last year. At the same time, the smart glasses segment grew by more than 40% and may expand by over 200% this year. This is the market Meta now considers a scalable source of revenue, especially through its partnership with EssilorLuxottica and the strong demand for the Ray-Ban Meta line, where the companies are even discussing expanding production capacity.
However, amid sales growth, pressure from legal risks is rising. Solos Technology has filed a lawsuit against Meta, EssilorLuxottica, and Oakley, accusing them of willful patent infringement covering key smart glasses technologies. The plaintiff is seeking compensation in the amount of several billion dollars and an injunction against the distribution of the disputed devices. Even if sales do not come to a halt, the potential costs, including compensation, royalties, or a protracted lawsuit, can significantly affect the financial model of the area, which Meta considers one of the key sources for future growth.
A class action lawsuit filed in the United States by an international group of WhatsApp users is also putting additional pressure on the company. The plaintiffs accuse Meta of misleading users about the confidentiality of correspondence and claim that the company stores and analyzes messages it allegedly encrypts.
Although Meta categorically denies these accusations and calls the lawsuit unfounded, the proceedings themselves highlight risks tied not only to fines and legal costs but also to reputational damage. Meta VR losses add further pressure to one of the company’s largest assets, the monetization of which depends directly on user trust. Elon Musk also weighed in on the dispute, claiming that Meta does not provide the required safety and suggesting a switch to X chat, which he views as the most secure solution.
However, users may disagree with this statement, with some believing that X chat encryption is not safer and that their messages can be accessed by X’s employees. For X, in the event of a possible lawsuit, the consequences would also be significant and may even affect other Musk businesses and Tesla stock price in particular.Â
Together, these factors form a challenging financial backdrop for Meta. On one hand, the company is addressing Meta VR losses by reducing unprofitable areas and reallocating capital to more promising segments. On the other, it faces growing legal and regulatory threats in precisely the areas where it expects new profit.
For investors, this means Meta’s future revenue and profitability will increasingly depend not only on technological advances but also on the outcomes of legal disputes that could reshape its cost structure and long-term strategy.
