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
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