Meta Platforms (META +0.22%) is one of the most successful and valuable companies in the world, but it may be known as much for its flops, as well as its wins.
Meta's big bet on the metaverse hasn't gone well, and the company seems to have wasted billions or even tens of billions of dollars trying to make that happen. It likely overpaid for WhatsApp when it dropped $19 billion on the messaging app in 2014, and its biggest product successes in social media recently have been borrowed, like Stories from Snapchat and Reels from TikTok.
Nonetheless, the company has built the world's biggest social media platform and an advertising business that is only topped by Google Search, and that's made Meta an unstoppable cash cow. Now, after struggling to take VR headsets mainstream for roughly a decade, Meta now seems to have its best candidate for a legitimate hit product.
According to The Verge, CEO Mark Zuckerberg told employees that the company sold more than 1 million Meta AI glasses in 2024, the vision tech it teamed up with Ray-Ban to make.
Now, Zuckerberg thinks glasses sales could go from 1 million to as high as 5 million this year.
Image source: Meta Platforms.
What smart glasses mean for Meta
Advertising makes up nearly all of Meta's revenue, and that's been the case for its entire history. In 2024, Meta generated $160.6 billion in ad revenue out of $164.5 billion in total revenue with $2.1 billion coming from Reality Labs, the division that includes AI products like its smart glasses.
Zuckerberg talked up the potential of the glasses on the earnings call, saying, "Our Ray-Ban Meta AI glasses are a real hit." He also set the stakes for the new product, saying that 2025 would be the year that determines if the Meta AI glasses are the kind of product that can eventually sell hundreds of millions of units.
For years, Zuckerberg has insisted that the company needs to control the next computing platform after having had to play by Apple's rules in mobile and smartphones.
After its bet on the metaverse flopped, the Meta AI glasses are now its best bet to own a meaningful hardware platform, whether it becomes the next dominant computing platform, gives Meta its own outlet into a number of other revenue streams, including games and its own version of the App Store, monetizing AI features, selling ads, and expanding the larger ecosystem around its social media platforms and engagement.
Zuckerberg is bullish enough on the AI glasses to say, "It's kind of hard for me to imagine that a decade or more from now, all the glasses aren't going to basically be AI glasses."
NASDAQ: META
Key Data Points
Is Meta stock a buy?
Most of the "Magnificent Seven" stocks have one primary business that makes up the bulk of its revenue, but that's especially true of Meta, given that advertising makes up nearly all of its revenue.
Diversifying its business will make the company more resilient and give it another revenue stream that it can count on when digital advertising, which is a cyclical business, pulls back.
It's too soon to say whether Meta AI glasses will be the hit product that Zuckerberg hopes it is. Meta doesn't need the glasses to be a hit. The advertising business will continue to dwarf it for years to come, but finding a hardware platform could help take the stock to the next level.
Meta stock is a buy with or without the glasses. The company enjoys a number of competitive advantages, including its massive user base, which drives its advertising business, and it trades at just a modest premium to the S&P 500, even though it's growing much faster than the index. However, building a mainstream hardware platform would justify the company's efforts in Reality Labs, and help drive growth in the business over the next decade. It would be a major win for the company if it can pull it off.
