Ray-Ban maker becomes fashion victim of AI trade

Meta Platforms

Yesterday 09:47

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Yawen Chen
LONDON, Oct 21 (Reuters Breakingviews) - EssilorLuxottica ESLX.PA has discovered that being fashionable with AI can be a mixed blessing. Shares in the €80 billion Ray-Ban maker jumped 14% on Wednesday after reassuring quarterly sales, but remain 47% below their November 2025 peak. The big question investors are grappling with is whether the boom in AI-driven smart glasses will help the group, or prove to be a curse.  
The enthusiasm was understandable. Shares had jumped 55% in the 14 months to their November peak after EssilorLuxottica expanded its smart glasses partnership with Meta Platforms META.O the year before. The ambition was to make Ray-Bans as indispensable as smartphones, by allowing users to record real life or amplify sounds with Meta's technology and EssilorLuxottica's expertise in frames and lenses. The partners sold more than 7 million AI-glasses pairs globally in 2025. Barclays forecasts nearly 19 million annually by 2030, generating €4.7 billion in revenue.
The hype is hard to live up to. Sales growth for “wearables”, a category comprising AI-powered and hearing-assistance glasses, slowed to 20% in the third quarter, from nearly 100% for AI glasses in the preceding three months, partly reflecting exceptionally strong sales a year earlier. Investors are nevertheless questioning how quickly smart glasses can reach a mass market, and how much EssilorLuxottica and Meta will capture. Google is working with Gucci owner Kering PRTP.PA on glasses due in 2027, while Samsung Electronics 005930.KS is developing rivals. Analysts at research firm Counterpoint reckon most devices may all soon offer similar features, suggesting a competitive market.
There is a more troubling possibility: smart glasses may replace ordinary pairs without producing equivalent profits. While EssilorLuxottica disclosed revenue from AI-powered and hearing-assistance glasses separately for the first time on Tuesday, it's still not clear how profitable the products will be. Bank of America estimates wearables' gross margins could reach 40%, compared with more than 60% for traditional eyewear. And over time, EssilorLuxottica's pricing power may diminish, if much of the value in smart specs goes to the Big Tech groups that provide critical software.
Governance worries may also play a role. Leonardo Maria Del Vecchio, an heir to the company's founder and an indirect shareholder, has criticised CEO Francesco Milleri, raising questions about management stability ahead of next year's board renewal. Still, current directors have unanimously backed Milleri, reducing the chance of disruption.
Moreover, Tuesday's results suggest the downside from smart glassses is far from inevitable. AI and hearing-assistance specs generated €486 million, just 6.5% of quarterly revenue, suggesting it is a long way from cannibalising the core business, which is still healthy. Sales of traditional frames and lenses rose by 6.5% year-on-year as both prices and volumes rose. And, even as AI-specs take off, EssilorLuxottica's premium frames and more than 30% share of the lens market should help preserve its pricing power.
The current share price offers some protection. Bank of America’s analyst estimates imply that the core business may generate earnings per share of €6.64 in 2027. Apply EssilorLuxottica's 2013-2023 average multiple of 27 times earnings, and it should be worth €179, more than the current stock price. That implies that shareholders are currently assigning little value to the fast-growing wearables franchise, or heavily discounting the still healthy core business. Investors once treated AI windfall as a given, but now they’ve gone to the other extreme. Staying trendy, however, is something EssilorLuxottica has always been good at.
     
Follow Yawen Chen on Bluesky and LinkedIn.
     
CONTEXT NEWS
EssilorLuxottica said on October 20 that third-quarter revenue rose 7.2% at constant exchange rates to €7.49 billion, beating the €7.36 billion expected by analysts polled by Visible Alpha.
The Ray-Ban maker disclosed wearables revenue for the first time, reporting sales of €486 million, or 6.5% of group revenue. Sales of smart glasses and Nuance hearing-aid glasses grew 20% at constant currencies, slowing from nearly 100% in the previous quarter. Its core Eyecare and Medtech business grew more than 6%.
EssilorLuxottica shares rose around 14% as of 0830 GMT on October 21 following the results, after roughly halving in value over the previous year.

(Editing by Neil Unmack; Production by Streisand Neto)
((For previous columns by the author, Reuters customers can click on CHEN/yawen.chen@thomsonreuters.com))