TLDR
- Meta plans to cut up to 30% of its metaverse division budget as part of 2026 planning, with layoffs expected as early as January.
- Reality Labs has lost over $70 billion since early 2021, with the most recent quarter showing a $4.4 billion loss.
- Meta stock jumped 4-5.7% on the news, marking its biggest intraday gain since late July.
- The cuts will primarily target the Quest VR unit and Horizon Worlds virtual platform due to less industry competition than expected.
- Zuckerberg has shifted focus away from the metaverse toward AI development and Ray-Ban smart glasses instead.
Meta stock surged Thursday morning after reports emerged that CEO Mark Zuckerberg plans to cut deep into the company’s metaverse operations. Shares jumped as much as 5.7% in early trading, the biggest intraday gain since July 31.
The cuts could reach 30% of the metaverse division’s budget for 2026. That’s three times higher than the standard 10% reduction Zuckerberg typically requests during annual planning cycles.
Budget discussions took place at Zuckerberg’s Hawaii compound last month. Executives from across Meta gathered to map out spending priorities for the coming year.
The metaverse group includes Quest VR headsets and Horizon Worlds virtual platform. Both products have failed to gain the traction Zuckerberg predicted when he renamed Facebook to Meta in October 2021.
Layoffs will likely begin in January if the cuts move forward. No final decision has been made yet.
Why Meta Is Pulling Back
The company cited less industry competition for VR technology than initially expected. Other tech giants haven’t rushed into the space the way Meta anticipated.
Most of the cuts will hit the Quest virtual reality division. It represents the largest portion of metaverse spending within Reality Labs.
Horizon Worlds will also face reductions. The virtual world platform has struggled to attract and retain users since launch.
Reality Labs operates as Meta’s long-term bets division. It houses VR headsets, AR glasses, and other experimental hardware projects.
The unit has hemorrhaged more than $70 billion since early 2021. Last quarter alone showed a $4.4 billion loss.
Zuckerberg’s New Focus
The CEO has quietly moved away from metaverse talk in recent months. He rarely mentions it on earnings calls anymore.
Instead, Zuckerberg now emphasizes AI development. Meta’s Llama language models and Meta AI chatbot have become his public priorities.
Ray-Ban smart glasses represent another focus area. These devices connect more directly to Meta’s AI push than pure VR products.
The company recently hired Apple’s top design executive. This signals continued commitment to consumer hardware despite the metaverse pullback.
Investors have long questioned the metaverse spending. They viewed it as a drain on resources that could go toward profitable initiatives.
Some analysts predicted this outcome. Mike Proulx from Forrester Research said in April that Meta would shutter Horizon Worlds before year’s end.
Children’s privacy and safety concerns also plagued the virtual worlds. Watchdog groups raised alarms about how the platform handled young users.
The 2021 rebrand came during a rough patch for Facebook. The company faced intense scrutiny over user safety and privacy issues.
Zuckerberg bet big that virtual worlds would define computing’s future. He still believes in that vision but reality hasn’t matched expectations.
Meta asked all divisions to find 10% cuts during the annual review process. The metaverse group received a steeper target due to its underperformance.
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