Meta is set to reduce its Metaverse budget by up to 30%, a move that may also lead to layoffs within the division.
Meta is reportedly planning to cut the budget for its Metaverse division by as much as 30%, according to a Bloomberg report. Company executives have indicated that these reductions could also result in layoffs.
The proposed budget cuts are part of Meta’s annual planning for 2026, which included a series of meetings held at CEO Mark Zuckerberg’s compound in Hawaii last month. While the cuts have not yet been finalized, they are expected to affect the teams working on Meta’s Quest virtual reality headsets and its social platform, Horizon Worlds.
Since rebranding in 2021, Meta has faced skepticism from investors regarding the significant resources allocated to the Metaverse, particularly as the division has incurred billions in losses each quarter. In contrast, the company has seen more success with its initiatives in artificial intelligence and smart glasses, although concerns remain about the sustainability of its investment strategies.
“Within our overall Reality Labs portfolio, we are shifting some of our investment from Metaverse toward AI glasses and wearables given the momentum there,” said Meta spokesperson Nissa Anklesaria in a statement to The New York Times. “We aren’t planning any broader changes than that.” This statement was also provided to Bloomberg, though it was not attributed to a specific spokesperson.
Craig Huber, an analyst at Huber Research Partners, commented, “Smart move, just late. This seems a major shift to align costs with a revenue outlook that surely is not as prosperous as management thought years ago.”
The Metaverse division operates within Reality Labs, which is responsible for producing Meta’s Quest mixed-reality headsets, smart glasses developed in partnership with Essilor Luxottica’s Ray-Ban, and upcoming augmented-reality glasses. Earlier this year, Meta invested $3.5 billion in Essilor Luxottica.
If the budget cuts proceed, they would reflect a broader trend of diminishing interest in products such as Horizon Worlds and Meta’s virtual reality hardware, both within the tech industry and among consumers.
This news comes as Meta seeks to maintain its relevance in the competitive AI landscape, particularly following a lukewarm reception of its Llama 4 model, according to Reuters. To support its ambitious goals, Meta has committed up to $72 billion in capital expenditures this year. Overall, major technology companies are projected to spend around $400 billion on AI in 2023.
Earlier this year, Meta reorganized its AI initiatives under the banner of Superintelligence Labs, with Zuckerberg spearheading aggressive hiring and acquisitions. The company recently brought on former Apple UI designer Alan Dye, who will oversee the design of hardware, software, and AI integration for its interfaces.
As Meta navigates these changes, the future of its Metaverse ambitions remains uncertain, with ongoing scrutiny from investors and industry watchers alike.
This report is based on information from Bloomberg.