Meta Platforms Inc. shares rose as much as 5.7% on Thursday after Bloomberg reported CEO Mark Zuckerberg plans significant cuts to the company's metaverse operations, a project he once championed as the company's future when rebranding from Facebook in 2021.
Credit：Meta
Executives are considering budget reductions as high as 30% for the metaverse unit next year, Bloomberg cited people familiar with the discussions. The cuts would likely include layoffs starting as early as January and would hit the virtual worlds product Meta Horizon Worlds and its Quest virtual reality (VR) unit. Shares closed 3.4% higher at $661.53, the highest level since October 30.
Meta confirmed it was reducing metaverse resources, stating that savings would be redirected toward artificial intelligence (AI) glasses and other wearables within its Reality Labs division. "Within our overall Reality Labs portfolio we are shifting some of our investment from Metaverse toward AI glasses and wearables given the momentum there," a Meta spokesperson said.
The move comes as investors have long viewed the metaverse effort as a financial drain. Reality Labs has lost more than $70 billion since early 2021, while Zuckerberg has increasingly focused on AI development and hardware products like Meta's Ray-Ban smart display glasses.
Extensive Cuts Target Core Metaverse Operations
The proposed cuts are part of Meta's annual budget planning for 2026, which included meetings at Zuckerberg's Hawaii compound last month, according to people familiar with the company. While Zuckerberg has asked executives to identify 10% cuts across Meta—standard practice in recent years—the metaverse group was asked to cut deeper this year.
The request reflects Meta's assessment that industry-wide competition over metaverse technology has not materialized at expected levels, the people said. The majority of proposed reductions would hit Meta's VR group, which accounts for the bulk of metaverse-related spending. Horizon Worlds would also face cuts.
Reality Labs Continues to Bleed Cash
Reality Labs booked a $4.4 billion operating loss while generating $470 million in revenue for the third quarter of the year, Meta reported on October 29. The division has recorded cumulative losses exceeding $70 billion since late 2020.
Finance chief Susan Li told analysts the company expects Reality Labs revenue for the fourth quarter to fall below the year-earlier period, partly because Meta did not introduce a new VR headset in 2025. "We're still expecting significant year-over-year growth in AI glasses revenue in Q4 as we benefit from strong demand for the recent products that we've introduced, but that is more than offset by the headwinds to the Quest headsets," Li said.
Wall Street Pressures Meta to Exit Money-Losing Metaverse
Investors and analysts have long urged Zuckerberg to abandon Reality Labs products that drain resources without generating meaningful revenue. Mike Proulx, a vice president at research and advisory firm Forrester, predicted in April that Meta would "shutter its metaverse projects, like Horizon Worlds" before year-end.
"Reality Labs division continues to be a leaky bucket," Proulx said at the time, pointing to the unit's losses. Shuttering metaverse efforts would "allow the company to give more focus to its AI projects including Llama, Meta AI, and AI glasses."
Zuckerberg rebranded Facebook as Meta in 2021 amid user safety and privacy controversies, positioning the metaverse as the company's future. His vision for people working and playing in virtual worlds has not gained consumer traction despite his continued conviction. Zuckerberg has largely stopped mentioning the metaverse publicly and on earnings calls, instead emphasizing AI model development and augmented reality (AR) wearables. Meta recently hired Apple Inc.'s top design executive Alan Dye to lead a new design studio focused on AI-powered wearables.
Explore more exclusive insights at nextfin.ai.
