Just a few years ago, the company then known as “Facebook” rebranded to “ Meta .” The bold move reflected a strong commitment to the metaverse technology . However, the firm is reportedly preparing to make steep resource reductions to the division that houses its virtual reality and augmented reality projects. Sources familiar with Meta’s internal budgeting discussions suggest the company is weighing significant budget cuts for its Reality Labs division, which has been the home of Mark Zuckerberg’s expansive virtual vision.
The proposed cuts could reach as high as 30% for the metaverse group in the next year. This would most likely lead to layoffs starting as early as January, as Bloomberg reports . If true, it would be a major pivot away from the all-in strategy that once defined the company.
Meta plans massive budget cuts for Metaverse
The potential cuts are part of Meta’s annual budget planning for 2026. While Zuckerberg reportedly asked executives across the board to target a standard 10% reduction in costs, the metaverse division was asked to cut deeper. This is reportedly due to the fact that the virtual world technology has failed to take off as expected, both with consumers and in terms of generating the fierce competition Meta once anticipated.
The majority of these proposed cuts are expected to impact key metaverse projects. More specifically, the Quest virtual reality headset unit and the company’s flagship virtual world product, Meta Horizon Worlds.
It’s noteworthy that the financial pressure on the company is clear. The Reality Labs division has lost more than $70 billion since the beginning of 2021. This massive drain on company resources is drawing heavy scrutiny from investors.
A new focus: AI and practical hardware
These planned cuts strongly indicate that Zuckerberg understands the metaverse is still years—or even decades—away from becoming the dominant computing platform he envisioned. In response, Meta’s focus is visibly shifting.
The company is now heavily investing in two areas. First is the development of large AI models, which underpin the current generation of AI chatbots and generative AI products. Then there is practical hardware that integrates these new AI experiences. This pivot includes products like the Ray-Ban smart display glasses , which tie AI functionality to real-world use cases rather than requiring immersion in a fully virtual world.
This strategy pivot reflects that Meta is prioritizing immediate, high-growth technology like AI over the long-term, high-cost bet of the metaverse, while aiming to soothe investor concerns over the billions lost in the pursuit of virtual worlds. The market reacted positively to the news, seeing the cuts as a necessary step.
