All eyes are on Meta’s smart glasses, but questions persist over its secretive AR project

Halfway through the keynote speech during the Meta (META) Connect event on Wednesday, Vice President of AR, Alex Himel, walked on stage with a briefcase handcuffed to his wrist.

“This is Orion,” CEO Mark Zuckerberg announced next to him, pulling out Meta’s augmented reality glasses. “Our first fully functioning prototype — and if I do say so, the most advanced glasses the world has ever seen.”

Investors finally got a sneak peak of a moonshot from the money-losing Reality Labs division inside Meta. The project has been shrouded in secrecy, after nearly a decade of development and billions of dollars in research and build. It also arrives as Wall Street increasingly questions the spending at the division, after it burned through over $50 billion since 2020.

Zuckerberg hopes Orion can bridge the gap between the digital and real world, and eventually replace smartphones. But its debut may be further away than Meta bulls think.

Meta has previously said it’s targeting 2027 to begin shipping its long-awaited AR glasses. Yet several insiders who worked on the teams building Orion exclusively told Yahoo Finance that despite the product being “magical” and “precious,” it may never hit consumers’ hands or give a return to Meta’s investment.

According to two former engineers with knowledge of the project, the initial goal was to build approximately 1,000 units, which quickly turned into only a few hundred. Out of those, people familiar with the project estimate fewer than twenty units actually turn on and show an image — taking the average cost of just the working prototypes into the “hundreds of thousands” of dollars.

Zuckerberg’s expectation was for some of the materials used to build Orion to drop in price over the last few years. That didn’t happen as hoped (partly due to trade restrictions), meaning some of the materials will have to be changed for future versions to be financially sustainable.

“They don’t know whether the technology will work and whether it’ll ever work at the price point anyone can afford,” said a former lead engineer who asked not to be identified. “Right now, they don’t have material that they can make this with at a reasonable cost.”

Orion is made up of three main parts: the glasses, a wristband, and a puck that powers the device’s graphics and connectivity. The puck is referred to as the “central compute,” people familiar with the project said.

Its chief materials are a silicon carbide wave-guide sandwiched between two protective lenses, seven cameras, two micro-LED projectors, and custom silicon — one of the more expensive parts of the product.

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The glasses also feature magnesium frames to help keep the weight down. According to people familiar with the project, the wave-guides each cost around $10,000.

Zuckerberg is aware of the challenges ahead. He ended his keynote saying they’re focused on key changes to Orion before they offer it as a consumer product.

“For now, I think the right way to look at Orion is a time machine,” Zuckerberg said. “These glasses exist, they are awesome and they are a glimpse of a future that I think is going to be pretty exciting.”

It remains to be seen how committed Zuckerberg and Meta are to Orion. Former employees tell Yahoo Finance that Meta moved a significant portion of its AR development team from the Orion project into its Ray-Ban smart glasses division earlier this month.

And investor questions on the overall outlook of Reality Labs are mounting. A dozen former high level employees previously told Yahoo Finance the division has been mired in mismanagement.

In a new note out Thursday following the event, JPMorgan analyst Doug Anmuth projected Reality Labs losses of $19 billion in 2024 and $23 billion in 2025.

Reality Labs lost $16.1 billion in 2023, according to company filings, while contributing less than $2 billion to revenue. By comparison, the company’s Family of Apps segment — which includes Facebook, Instagram, and WhatsApp — pulled in $62.9 billion in profits.

“The potential for Meta to pull back on Reality Labs spending and losses has been a frequent topic in our recent discussions with investors. And while it’s difficult to discern between a shift of a few billions dollars, we don’t come away from Connect thinking that Meta will pare back Reality Labs losses,” Anmuth said.

Yasmin Khorram is a Senior Reporter at Yahoo Finance. Follow Yasmin on Twitter/X @YasminKhorram and on LinkedIn. Send newsworthy tips to Yasmin: yasmin.khorram@yahooinc.com

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