By Dan Gallagher

There's a popular saying in Silicon Valley that hardware is hard. In the case of Meta Platforms, it's also superexpensive.

The parent company of Facebook and Instagram has generated a cumulative operating loss of a little more than $68 billion over the past four years in the segment that it calls Reality Labs, and that is just the amount investors know about. Meta didn't start disclosing financial results for its hardware-focused business until 2021 -- seven years after it spent $2 billion to acquire virtual reality device maker Oculus.

That business has produced a few modest hits, but not enough to stem the red ink. Meta has shipped about 2.8 million units of its Ray-Ban smartglasses over the past four quarters, according to IDC. That is a decent number, but still only about 1% of what the market-research firm estimates for Apple's highly profitable iPhone shipments over the same period. And the new smartglasses that Meta unveiled last week aren't expected to change that course either; analysts project nearly $20 billion in operating losses for the Reality Labs segment this year.

But Meta is playing a long game with a very ambitious target. The company apparently believes that Apple's dominance of consumer devices is vulnerable in the AI age. Chief Executive Mark Zuckerberg sees smartglasses as crucial to his vision for an amped-up version of artificial intelligence called "superintelligence," defined as AI that surpasses human intelligence.

They aren't there yet. But AI is giving a boost to the capabilities of smartglasses, which began as basically face-mounted cameras. Meta's latest glasses called Ray-Ban Display add features like live captioning, which displays text of the person talking to you in a noisy room. Future smartglasses backed by more powerful AI models could theoretically provide full contextual awareness, where a user could do something like look at an unassembled piece of furniture and immediately get step-by-step directions on how to put it together.

"We designed our glasses to be able to empower people with new capabilities as soon as they become possible," Zuckerberg said in introducing the new devices last week.

That's another way of saying that Meta's glasses are well ahead of their time. The new Ray-Ban Display projects data right into the lens and includes an innovative wrist band allowing users to control the device with hand gestures. The new specs drew a lot of interest -- especially with a $799 intro price that's far cheaper than Apple's $3,500 Vision Pro headset. But Meta's specs may also need more polish, given that Zuckerberg's live demo had some notable glitches on stage.

Still, given the company's substantial investments in AI, Zuckerberg is right to also pursue new ways that users may interact with it. Smartphones and personal computers are the main portals to AI now, but that could shift as the technology unlocks new capabilities not well suited to those devices. Meta isn't the only company working on this idea. OpenAI has acqui-hired famed former Apple designer Jony Ive to build a line of "AI companions" that the company has described as a "third core device" besides the PC and smartphone.

These newcomers to hardware would seem outmatched. Apple has many decades of experience building sharply designed and very profitable hardware products. But the company formerly known as Facebook has some advantages as well, including the ability to put its products in front of a massive daily user base of nearly 3.5 billion people. And the fat profits generated by Meta's core advertising business can cover a lot of bets; Meta's total operating margin was 44% for the 12-month period ended in June -- 12 percentage points ahead of Apple's for the same period, despite Meta's steep losses in its Reality Labs division.

Meta has also been much bolder in its shift to AI, helped by Zuckerberg's enthusiasm and total control of the company's voting shares. Meta is vastly outspending the much larger Apple in both R&D and capital expenditures and owns more core AI technology, such as its Llama family of large language models.

Brian Nowak of Morgan Stanley said Meta's new glasses show the importance of the company's "full stack approach" to building an AI platform. He added that Meta's "leading proprietary hardware, AI native integration and unique data sets are key differentiators to capture this outsized opportunity," in a note to clients.

Face computers from the owner of Facebook may yet turn out to be a natural fit.

Write to Dan Gallagher at dan.gallagher@wsj.com

(END) Dow Jones Newswires

September 26, 2025 05:30 ET (09:30 GMT)

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