Meta’s Reality Labs keeps hemorrhaging cash, and AI isn’t helping

Meta’s Reality Labs division has been a money pit for years, and the latest quarterly earnings show no signs of that changing. The unit lost $4.8 billion in Q1 2026 alone. That’s actually a slight improvement from the $5.1 billion loss in the same quarter last year, but let’s not pretend that’s a win when you’re still burning through cash like a teenager with a trust fund.

For context, Reality Labs has lost over $60 billion since Meta started breaking out its financials in 2020. That’s more than the entire market cap of many Fortune 500 companies. And the revenue side? It pulled in just $1.2 billion last quarter, mostly from Quest headsets and Ray-Ban smart glasses. Not exactly a return on investment.

But here’s where it gets interesting — or depressing, depending on your perspective. Meta is now signaling that its AI ambitions are going to add significantly to its capital expenditure. Mark Zuckerberg has been talking up AI as the next big thing, and the company is investing heavily in data centers, chips, and research. The problem is that AI spending doesn’t replace AR/VR spending; it piles on top of it.

Meta’s total capex for 2026 is expected to hit $35-40 billion, up from $28 billion last year. A big chunk of that is for AI infrastructure, but Reality Labs still gets its share. So you have two massive bets running in parallel, both losing money, both demanding more cash, and neither generating meaningful returns yet.

I’ve been watching this space for a while, and I have to say, the logic here is hard to follow. Meta is essentially trying to build two separate futures — one where everyone lives in a VR metaverse, and another where AI powers everything from ads to autonomous agents. Both are capital-intensive, both are speculative, and both are being funded by the cash cow that is Facebook’s ad business.

That ad business is still printing money, mind you. Meta reported $36 billion in ad revenue last quarter, up 18% year-over-year. So the company isn’t in danger of going bankrupt tomorrow. But the question is how long investors will tolerate this level of spending without seeing a payoff.

The Ray-Ban smart glasses have been a modest hit, selling around 2 million units last year. But that’s a drop in the bucket compared to the billions being poured into R&D. And the Quest headsets? Still a niche product for gamers and developers. The mainstream adoption Zuckerberg keeps promising hasn’t materialized.

Meanwhile, Apple’s Vision Pro is struggling too, so it’s not like Meta is alone in this mess. But Apple has a $3 trillion market cap and can afford to experiment. Meta’s valuation is a fraction of that, and its core business faces real threats from TikTok and regulatory pressure.

I’m not saying Meta should abandon AR/VR or AI. But the company needs to show some discipline. Right now, it feels like throwing money at every shiny object without a clear plan for when any of it will pay off. And with AI costs about to spike, the burn rate is only going to accelerate.