In a significant strategic shift, Meta Platforms Inc., led by founder and CEO Mark Zuckerberg, is preparing to implement substantial resource reductions within its ambitious metaverse project. This initiative, once central to the company's future and the reason for its rebranding from Facebook, is now facing potential budget cuts as high as 30% for the coming year.
Deep Cuts Planned for Reality Labs
According to a Bloomberg report citing sources familiar with internal discussions, executives at the social media giant are considering these deep cuts for the metaverse group during the company's annual budget planning for 2026. While Zuckerberg typically mandates a standard 10% reduction across all divisions, the metaverse unit has been asked to cut much deeper this time.
The report indicates that the primary reason for the steeper cut is the lack of anticipated industry-wide competition for the metaverse technology. The division in question, known as Reality Labs, encompasses the virtual worlds platform Meta Horizon Worlds and the Quest virtual reality (VR) hardware unit. The majority of the proposed budget reduction is expected to impact the VR group, which accounts for most of the metaverse-related spending.
Since the beginning of 2021, Reality Labs has recorded staggering losses exceeding $70 billion. The proposed cuts may also involve employee layoffs, potentially starting as early as January next year, though a final decision is yet to be officially announced.
Strategic Pivot Towards Artificial Intelligence
Concurrently, Mark Zuckerberg has visibly shifted his public focus towards artificial intelligence. The CEO has largely stopped mentioning the metaverse on the company's earnings calls. Instead, Meta is now emphasising the development of large AI models, AI chatbots like Meta AI, and associated hardware products such as its recently launched Ray-Ban smart glasses with displays.
This strategic realignment aligns with earlier predictions from industry analysts. Mike Proulx, a Vice President at research firm Forrester, had previously forecasted that Meta would eventually "shutter its metaverse projects, like Horizon Worlds." He argued that such a move would allow the company to concentrate its resources and efforts on AI projects, including its open-source large language model Llama and AI-integrated hardware.
What This Means for Meta's Future
The planned cuts signal a major recalibration for one of the world's largest tech companies. The metaverse vision, which prompted the corporate name change from Facebook to Meta in late 2021, is being scaled back significantly as the financial realities of the massive investment become clear. The company appears to be entering a new chapter where AI, not the immersive virtual world, is the central pillar of its future technology bets.
This move reflects broader trends in the tech industry, where a gold rush towards generative AI has diverted attention and resources from other long-term projects. How Meta manages this transition—balancing its existing metaverse commitments with a full-throttle push into AI—will be closely watched by investors and the tech community worldwide.
