Meta is planning to slash the budget for its Metaverse division according to a Bloomberg report. Company executives say the virtual reality platform’s budget will be reduced by up to 30%, and these reductions may also include layoffs.
The proposed metaverse cuts are part of the company’s annual budget planning for 2026, which included a series of meetings at Zuckerberg’s compound in Hawaii last month. The cuts are yet to be finalized, however they would impact the unit that works on Meta’s Quest virtual reality headsets, along with its social platform Horizon Worlds.
Since Meta’s rebrand in 2021, investors have been skeptical about resources being allocated to Metaverse which lose billions of dollars each quarter. The company has been more successful with its efforts with artificial intelligence and smart glasses, though investors still worry that its investment plans are too steep.
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“Within our overall Reality Labs portfolio we are shifting some of our investment from Metaverse toward A.I. glasses and wearables given the momentum there,” Meta spokesperson Nissa Anklesaria tells The New York Times in a statement. “We aren’t planning any broader changes than that.” Bloomberg was given the same statement, though not attributed to a specific spokesperson.
“Smart move, just late,” said Huber Research Partners analyst Craig Huber. “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 group sits within Reality Labs, which produces the company’s Quest mixed-reality headsets, smart glasses made with Essilor Luxottica’s Ray-Ban and upcoming augmented-reality glasses. Earlier this year, Meta invested $3.5 billion in Essilor Luxottica.
If Meta goes ahead with the cuts, the move would reflect the overall lack of interest in products like Meta’s social virtual reality platform Horizon Worlds, as well as its virtual reality hardware — both in the industry at large, as well as among consumers.
This report comes as Meta tries to stay relevant in the AI race, after a poor reception of Llama 4, according to Reuters. To fuel its ambitious goals, Meta has committed as much as $72 billion in capital spending this year. Overall, large tech companies are expected to spend around $400 billion on AI this year.
Meta reorganized its AI efforts under Superintelligence Labs earlier this year, with Zuckerberg leading aggressive acquisitions and hiring. It most recently added former Apple UI designer Alan Dye to its team, who will oversee the design of “hardware, software and AI integration for its interfaces.”