Meta may cut its metaverse budget by up to 30 percent, a move that could trigger layoffs next year. The Reality Labs unit has lost more than $70 billion since 2021, pushing Meta to shift its focus toward AI tools and hardware such as Ray-Ban smart glasses. Investors appear to welcome the cost cuts and the move toward AI.
Budget cuts
As per reports, Meta may reduce the budget for its metaverse division by as much as 30%. This division includes Meta Horizon Worlds and the Quest virtual reality unit. The cuts may also lead to layoffs early next year, although Meta has not confirmed any final decisions. These ideas were discussed during budget meetings held at Mark Zuckerberg’s Hawaii property last month.
Losses behind possible changes
After rebranding from Facebook Inc. in 2021, Meta began focusing on the metaverse. However, the Reality Labs unit, which handles metaverse projects, has lost more than $70 billion since then. The high cost of virtual reality (VR) development and slow user growth have made it hard for Meta to justify continued heavy spending. As a result, most of the planned reductions will affect virtual reality operations, which make up the largest share of the division’s costs.
AI in focus
In recent months, Zuckerberg has spoken more about Meta’s progress in AI. The company has released new AI tools and is working on models like Llama and Meta AI. Meta is also expanding its hardware plans, including Ray-Ban smart glasses developed with EssilorLuxottica. Analysts have urged the company to shift more funding to AI, which is expected to deliver faster growth and better returns than VR.
Concerns
Investors have long questioned Meta’s heavy spending on the metaverse, saying it has not produced strong results. Regulators have also raised concerns about safety for children in virtual worlds. Thursday’s stock jump showed that investors may support Meta’s decision to cut costs and move toward AI-focused projects.
