Meta Ditches High-End VR Headset, Debuting New Low-Cost Quest 3S VR Headset Set at Connect Conference in September

Meta's Metaverse Ambitions Face New Challenges

Meta Platforms, the tech giant behind Facebook, is navigating a pivotal moment as it contemplates scaling back its ambitious metaverse projects.

The company's Reality Labs division, which focuses on virtual and augmented reality technologies, has endured substantial financial losses, amounting to $16 billion in 2023 alone.

Recent developments suggest a strategic shift, with the potential cancellation of a high-end mixed-reality headset that would have directly competed with Apple’s Vision Pro.

Reality Labs' Cost-Cutting Measures

According to The Information, a reputable technology news outlet, Meta has decided to halt the development of a premium mixed-reality headset known internally as La Jolla.

This headset, initially planned for a 2027 release, was intended to feature cutting-edge micro OLED screens, a technology also used in Apple’s Vision Pro.

The decision to cancel the project follows a comprehensive product review led by CEO Mark Zuckerberg and CTO Andrew Bosworth, among other senior executives.

Justin Post of BofA Research highlighted that the cessation of this high-end headset could be part of broader budgetary constraints, including a reported 20% spending cut on Reality Labs hardware by 2026.

Stock Market Reactions and Future Projections

The market's reaction to Meta’s financial maneuvers and strategic shifts has been mixed.

While Meta’s stock has more than quadrupled since its 2022 lows — recovering from a slump caused by poor digital advertising performance and skepticism about the metaverse — there is ongoing uncertainty.

The stock fell by 1.5% to $520.31 recently, even as it has surged over 40% in value this year, buoyed by strong earnings and positive AI forecasts.

Post maintains a Buy rating with a price target of $563, suggesting that cost-cutting measures could further bolster Meta’s stock value.

The Competitive Landscape: Meta vs. Apple

Meta's decision to scale back its high-end headset development might signal a retreat from competing with Apple in the premium headset market.

Apple’s Vision Pro, launched at a starting price of $3,499, is positioned as a luxury device, with analysts estimating annual sales of fewer than 500,000 units.

However, Apple is reportedly planning a more affordable version of the Vision headset by late 2025, which could intensify competition in the VR/AR space.

Meta's New Directions: Affordable VR Options

Looking ahead, Meta is gearing up to unveil a new low-cost VR headset, the Quest 3S, at the upcoming Connect conference scheduled for 25-26 September 2024.

Bloomberg reports that this new model is expected to be priced between $300 and $400, a notable reduction from the $500 price tag of the Quest 3.

The Quest 3S may forgo controllers to achieve a lower price point, aiming to attract a broader audience and reinforce Meta’s competitive edge against Apple's high-priced Vision Pro.

In addition to the budget-friendly VR headset, Meta is preparing to showcase a prototype of its Orion augmented reality glasses at the conference.

These developments reflect Meta’s ongoing commitment to expanding its VR and AR ecosystem, despite the financial strains experienced by Reality Labs.

The Quest 3, introduced in the fall of 2023, highlighted Meta’s efforts to merge virtual and real-world experiences with its full-color front-facing cameras, providing enhanced video quality and interactive capabilities.

Meta Sees 21% Surge in Losses to $4.5B

Reality Labs continues to experience significant financial strain, with an operating loss of $4.5 billion in Q2 this year.

This figure represents a 21% increase in year-on-year expenses, reaching $4.8 billion, while revenue grew by 28% to $353 million, driven primarily by Quest VR headset sales.

The ongoing losses highlight the financial strain Meta faces as it attempts to balance its investments in cutting-edge technology with its broader financial health.

Charting a New Course in the Metaverse

Meta's recalibration of its metaverse strategy, marked by the cancellation of the high-end La Jolla headset and a focus on more affordable VR solutions, signals a pivotal shift in the company's approach.

As Meta navigates substantial losses in Reality Labs, the decision to pivot from competing with Apple's premium Vision Pro indicates a strategic realignment towards accessible technology and cost-efficiency.

This bold move could redefine the VR landscape, positioning Meta to leverage its AI-driven strengths while potentially reshaping competitive dynamics in the burgeoning metaverse sector.

With the Quest 3S and Orion glasses on the horizon, Meta is not retreating but recalibrating, setting the stage for a new chapter in virtual and augmented reality innovation.