AI Glasses to Replace Smartphones? Meta Is Taking Aim at Apple
In Q2, Meta Platform’s (NASDAQ: META) advertising business showed the market everything it wanted to see. However, Meta’s Reality Labs segment continues to be an eyesore. Despite losing more than $18 billion over the last 12 months, Mark Zuckerberg sees unbridled upside in this part of the business.
Below, we’ll dive into what the Magnificent Seven company may see as the ultimate goal for Reality Labs: AI glasses replacing smartphones. We’ll examine the potential size of this opportunity and how Apple's (NASDAQ: AAPL) relative lack of research and development could help Meta in this venture.
Zuckerberg Makes Bold Statements on AI-Glasses-Driven Future
On Meta’s Q2 earnings call, analyst Youssef Squali of Truist Securities issued a point-blank question to Zuckerberg, saying, "Do you believe [AI] glasses ultimately replace smartphones?”
Zuckerberg didn’t outright say "yes" but strongly implied that this is a significant part of Reality Labs’ goal. Zuckerberg said, “I continue to think that glasses are basically going to be the ideal form factor for AI.”
He went on to draw an analogy between future AI glasses and contact lenses. Zuckerberg said that he would be “at a cognitive disadvantage going through the world if he didn't have his vision corrected using contact lenses." He said in the future, if someone doesn’t have AI glasses, they would also “probably be at a pretty significant cognitive disadvantage compared to other people."
In summary, Zuckerberg believes that glasses will be the best way to interact with AI, implying that smartphones will not. Additionally, he believes that someone who foregoes using AI glasses and uses a smartphone instead will be at a cognitive disadvantage.
Overall, these comments point to Zuckerberg's belief that AI glasses will be essential in the future. Smartphones could still have their place, but they would be an optional tool, while AI glasses would be a required one.
AI Glasses Could Target a $400 Billion Market
While the notion that smartphones are a “required” tool today may be debatable, their massive adoption is undeniable. Pew Research estimated in 2019 that 76% of people in advanced economies owned a smartphone.
This large penetration makes the global smartphone market a useful reference point when assessing the potential opportunity for AI glasses.
Global smartphone sales at over $100 billion in Q2 2025 imply an annual run-rate of $400 billion. That’s around 2.2x more than the amount of revenue that Meta generated over the last 12 months. Overall, it’s extremely difficult to say that Meta could capture all or most of that revenue.
However, it highlights how the company could massively expand its sales in the long term if AI glasses become as necessary as Zuckerberg believes. This could create game-changing upside in shares. Still, that is a highly theoretical scenario at this point.
Lagging iPhone Innovation Creates an Opening for Meta
In some ways, it’s not entirely unrealistic to think that AI glasses could replace smartphones. Apple has been routinely criticized over the past years for releasing new iPhones that offer minimal improvements over their predecessors.
It's part of the reason the firm’s iPhone revenue growth has slowed to a snail's pace. Growth was -2.4% in 2023 and was just barely positive in 2024. Still, to give Apple its flowers, it saw record iPhone upgrades last quarter, helping iPhone sales rise more than 13%.
Nevertheless, the general trend holds; iPhone revenues increased at a compound annual growth (CAGR) rate of just under 3% from 2015 to 2024.
This starkly contrasts with the 51% CAGR achieved from 2009 to 2014, when the iPhone was revolutionary for its time. This demonstrates the iPhone’s relative lack of innovation over the recent past, making consumers feel less of a need to upgrade.
Meanwhile, Meta is investing tens of billions of dollars a year to create innovative technologies like AI glasses that could offer benefits smartphones simply cannot. Over the last three years, Meta’s average research and development spending has been equal to more than 27% of its revenue.
For Apple, that figure is just 7.7%. This shows how Meta is prioritizing innovation to a much greater extent. Although this relative lack of R&D spending may not soon impact the company, it could one day catch up to Apple.
Overall, whether AI glasses will reach mass adoption remains a point of intense speculation. However, if they do, Meta could continue delivering significant returns for years. With the company’s advertising business chugging along, Reality Labs could one day serve as a powerful added growth driver.
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