Meta thinks it can save its hardware division with AI subscriptions. There are reasons to be skeptical.

Fresh after rejuvenating investors with alternate revenue streams, Meta is throwing them a curve. It believes the path to those software riches requires pushing even deeper into money-losing hardware.

While Mark Zuckerberg’s Reality Labs division continues to rack up losses at a spectacular rate — to the tune of $4 billion last quarter alone and $83 billion since the fourth quarter of 2020 — a newly leaked internal memo reported by The Information reveals Meta thinks it can use physical gadgets as the ultimate Trojan horse for AI software subscriptions.

Meta is reportedly prepping an ambitious new lineup of wearable devices, including expanding its smart glasses lineup, testing an AI-powered pendant, and targeting 10 million device sales in the second half of 2026.

But the real strategy shift isn’t about selling gadgets; it’s about monetizing the software inside them. Meta’s VP of wearables, Alex Himel, noted that to “build a sustainable business beyond hardware margins,” the company needs to push users toward paid subscriptions for its Meta AI chatbot and other apps.

Like much of the tech world, Meta is hoping to develop a cozier relationship with its users by also selling the devices on which they access its software. The thinking is that Meta will sell the hardware as the gateway, and charge monthly for the AI brains. Wall Street, however, is deeply skeptical for a very simple reason: the math is brutal.

Reality Labs lost over $19 billion last year and Zuckerberg earlier this year said he expects 2026’s losses to be similar. Meanwhile, Himel’s memo says that Meta aims to reach 6.8 million monthly active wearable users by the end of this year.

If we assume a utopian, best-case scenario where literally every single one of those 6.8 million users ponies up for an $8-a-month Meta AI subscription ($96 a year), it would generate roughly $653 million in annual revenue.

That covers 3.4% of Reality Labs’ annual operating loss.

To actually break even on an $8 monthly sub, Meta would need around 200 million paying subscribers. For context, Spotify has 293 million paying subscribers globally — and it took the streamer over a decade to get there without asking anyone to wear a camera around their neck or on their face. Zuckerberg expects Reality Labs’ losses to gradually come down, which could theoretically mean needing fewer subscriptions to cover the loss, but that will take time and perfect execution.

Meta isn’t entirely blind to this volume problem. The memo also highlights a new push into the B2B market with “Wearables for Work,” targeting enterprise clients who have much deeper pockets and a willingness to pay premium rates for “vertical-specific” tech.

Enterprise contracts might eventually offer higher margins, but for now, Meta’s plan to reverse its hardware losses looks less like a financial turnaround and more like a drop in the bucket. Wall Street loves a good recurring revenue stream — but an $8 subscription can’t magically fill a $19 billion sinkhole (not to mention address its yawning $145 billion capex bill).

The stock is down around 3% today.