Shift in AI focus at Meta during Q1 2025, marked by strong earnings, alongside the triumph of Ray-Ban sales
Meta, the parent company of Facebook, is currently in discussions with the European Commission regarding the non-compliance of its subscription for no ads model with the DMA [1]. Despite this regulatory challenge, the tech giant is experiencing strong sales for its virtual reality (VR) devices and augmented reality (AR) smart glasses.
Strong Sales for Meta Quest 3S and 3
The Meta Quest 3S, the latest addition to Meta's VR headset lineup, is selling well in 2025, with around 270,000 units per quarter recently. The original Meta Quest 3 has also performed strongly, supported by a delayed release of Meta Quest 4, which has been pushed to 2026 [2]. This extension of Quest 3's market position is helping sustain revenue momentum in the VR headset segment for Meta.
Ray-Ban Meta Smart Glasses Gain Traction
Meta's Ray-Ban Meta Smart Glasses, also known as Hypernova AR glasses, currently constitute about 27% of Reality Labs' revenue, comparable to the Quest 3 and 3S contribution levels [1]. This substantial revenue share indicates promising consumer acceptance and commercial success for the smart glasses category within Meta's XR product lineup.
Ongoing Investments and AI-Driven Growth
Meta's Reality Labs division continues to receive significant investment, with annual spending of about $10 billion, aiming to develop the metaverse and drive AR/VR adoption over the medium to long term [4]. Analysts expect Meta's earnings growth of about 17% annually through 2030, linked to these AR/VR initiatives, with a potential doubling of its stock price and major expansion of AR/VR’s revenue contribution [4].
The strong financial performance, including robust advertising revenue aided by AI, supports ongoing investments in both VR devices like Quest 3S and AR products such as Ray-Ban Meta glasses, suggesting a favorable outlook for future sales and product developments.
Plans for a Standalone AI App and Future Product Rollouts
Mark Zuckerberg, Meta's CEO, has mentioned the importance of creating a standalone AI app to improve access and feature set, aiming to compete with ChatGPT and Gemini Live [3]. This move is crucial for Meta to establish leadership as the primary personal AI used by people.
In addition, Zuckerberg's vision includes "billions of AI glasses" in the next "five to ten years," which might refer to the Hypernova AR glasses rumored to arrive this year [5].
Regulatory and Economic Challenges
Regulatory headwinds, such as the Digital Markets Act (DMA), pose a significant threat to Meta's profits, as they account for 16% of its total profits [1]. Reduced spend in the U.S. from Asia-based e-commerce exporters is anticipated due to the upcoming disappearance of the de minimis exemption for Trump's Chinese tariffs on May 2 [1].
Meta warned about potential significant impacts on its business from legal and regulatory headwinds in the EU and the U.S. [1]. The company's CFO believes the company is well-prepared to handle macro-economic uncertainties and regulatory issues [1].
Conclusion
In summary, Meta is experiencing strong sales for its XR devices, with the Meta Quest 3S and 3 selling well in 2025, and the Ray-Ban Meta Smart Glasses gaining traction. Ongoing investments and AI-driven growth underpin positive expectations for VR/AR device sales and new product rollouts in the near and mid term. However, regulatory and economic challenges remain, and the company is preparing to navigate these headwinds.
[1] The Verge
[2] Bloomberg
[3] TechCrunch
[4] CNBC
[5] Recode
The tech giant, Meta, is leveraging artificial-intelligence technology to boost its advertising revenue and finance future investments in its XR devices, such as the Meta Quest 3S and 3, and AI-enabled products like the Ray-Ban Meta Smart Glasses. Despite regulatory challenges from the European Commission, the company is anticipating substantial growth and expansion in the AR/VR market, including the development of a standalone AI app and billions of AI glasses in the next five to ten years.
