Social network Facebook to break out its FLR division

The social network said that starting in the fourth quarter of 2021, it would break out Facebook Reality Labs (FRL) as a separate reporting segment from its family of apps

Facebook Inc said on Monday it will break out its division focused on hardware, virtual and augmented reality into a new reporting segment, as its main advertising businesses face “significant uncertainty.”

The social network warned that Apple Inc’s new privacy rules would weigh on its digital business in the current quarter, after the social media company reported quarterly revenue below market expectations.

Chief Financial Officer David Wehner said Facebook expected its investment in FLR to reduce its overall operating profit in 2021 by approximately $10bn.

Shares of the company were trading up about 2 percent at $336 in volatile extended trading on Monday. Facebook, whose shares have gained about 20 percent so far this year, is about $85bn away from regaining a spot on the $1 trillion club and joining new entrant Tesla Inc.

Facebook said that starting in the fourth quarter of 2021, it would break out Facebook Reality Labs (FRL), the part of its business that works on augmented and virtual reality, as a separate reporting segment from its family of apps.

We are committed to bringing this long-term vision to life and we expect to increase our investments for the next several years, the company wrote in its third-quarter earnings release this afternoon. Facebook sees AR and VR as being core to the next generation of online social experiences.

The company expects fourth-quarter revenue to be in a range of $31.5bn to $34bn. Analysts had forecast $34.84bn in revenue, or a 24.1 percent jump, according to IBES data from Refinitiv.

Its third-quarter revenue too faced the brunt of Apple’s privacy rules that made it harder for brands to target and measure their ads on Facebook.

Apple updated iOS in April with a new privacy feature that requires users to actively opt in to allow apps to track them across other apps and websites. Initially, social media companies said they weren’t certain how much it would impact their ads businesses, which rely on that tracking in part to measure the efficacy of ads.