Smart Glasses Give Tech Giants Dangerous FOMO

Rose-tinted. Smart glasses will come into focus in 2025. Meta’s collaboration with EssilorLuxottica has become a bestseller in most Ray-Ban stores across Europe, the Middle East and Africa, with total sales topping 1 million units, according to Counterpoint Research. Early success has emboldened rivals to develop their own specs.

The Ray-Bans, which wrap a mic, audio, camera and artificial intelligence assistant into a familiar frame, cost some $300 apiece. Unlike bulky virtual or augmented reality headsets that have failed to win mass appeal, Meta’s devices actually look like normal glasses, are lightweight – under 50 grams – and offer useful day-to-day features like real-time translation and hands-free picture and video capture thanks to in-built memory and processing power. They also seamlessly connect to a smartphone, similar to wireless earbuds. That’s all thanks to the latest AI chipsets, software and batteries; Meta’s Ray-Bans boast a battery life of four hours, compared with less than one hour for Snap’s rival product.

Other tech giants are eyeing this space. Baidu launched glasses powered by its AI bot Ernie in November. Days later, Reuters reported that Amazon is developing smart glasses for delivery drivers. Suppliers are ramping up capacity: specialist lens maker Vuzix reckons it will be able to churn out as many as 50 million units a year by 2028, up from around 1 million in 2024. Apple, Samsung Electronics, Xiaomi and Alphabet itself are all working on new products, according to media reports.

Profitability, though, may still be out of sight. Financial details for the snazzy Ray-Bans are not disclosed, but they are housed in Meta’s Reality Labs division, which also includes Orion, its augmented reality glasses prototypes. That unit is forecast to book more than $2 billion of revenue in 2024, per Visible Alpha forecasts, a 16% increase from 2023.

But while Reality Labs will be the fastest-growing division for years to come, it is expected to rake in combined operating losses of $60 billion over the next three years, Visible Alpha estimates show. Parent Meta has asked the unit to cut spending by nearly 20% between now and 2026, The Information reported.

There are glimmers of hope. Analysts at Counterpoint estimate it costs Meta and EssilorLuxottica nearly $135 to make a pair of smart Ray-Bans, implying a 45% gross margin. That’s higher than the roughly 30% logged for Apple’s smartwatch, and close to the estimated 50% earned by AirPods, according to analysts from Itaú BBA. Bringing down the costs of the processor chip and battery without compromising on functions and features will be a challenge but not impossible.

In 2025, that promise will lure more companies and investors to try and emulate Mark Zuckerberg’s example. However, spotting a winner will be tough.