Meta’s CEO Mark Zuckerberg appears to have finally acknowledged that one of the company’s most significant investments—Metaverse—is not performing as anticipated. This is also the technology after which the company rebranded itself. In 2021, following 17 years of operating under the name Facebook, the parent company of Facebook, Instagram, WhatsApp, and Oculus transitioned to the name Meta. Currently, a report from Bloomberg indicates that Meta is poised to reduce its Reality Labs budget by as much as 30%. These proposed cuts to the metaverse initiative are reportedly part of the company’s annual budget planning for 2026, which involved a series of meetings at Zuckerberg’s estate in Hawaii last month. For those who may not be aware, the Metaverse unit focuses on developing virtual reality headsets and a VR-based social network, which includes the production of the company’s Quest mixed-reality headsets, smart glasses created in collaboration with Essilor Luxottica’s Ray-Ban, and forthcoming augmented-reality glasses. Meta has faced challenges in promoting its vision of an immersive metaverse comprising interconnected virtual worlds and in broadening the market for its devices beyond the gaming community’s niche. Analysts interpret this decision as indicative of the general disinterest in products such as Meta’s social virtual reality platform Horizon Worlds, as well as its virtual reality hardware—both within the industry and among consumers.
$70 billion in losses and counting
Meta CEO Mark Zuckerberg’s vision for the Metaverse has incurred over $70 billion in losses during the last four years. It is therefore not surprising that shares of Facebook’s parent company increased by 4%, as this development alleviated some investor concerns regarding a gamble that CEO Mark Zuckerberg has supported with billions of dollars. “Smart move, just late,” remarked Craig Huber, an analyst at Huber Research Partners, in an interview with Bloomberg. He further stated, “This appears to be a significant shift aimed at aligning expenses with a revenue forecast that is undoubtedly not as favorable as management had anticipated years ago.”
Layoffs may be coming to Meta
Reality Labs consists of a Metaverse division and a wearables division. Within the Metaverse division, it has been reported that executives are contemplating reductions in VR positions. According to the report, such substantial resource cuts are likely to involve layoffs as soon as January.
Where the budget cuts for the Metaverse may be directed
The report emerges as Meta strives to maintain its relevance in the competitive landscape of artificial intelligence in Silicon Valley, particularly following the unfavorable reception of its Llama 4 model. To support its ambitious objectives, Meta has allocated up to $72 billion for capital expenditures this year. Earlier this year, the company restructured its AI initiatives under the banner of Superintelligence Labs, with Zuckerberg reportedly taking a hands-on approach in aggressively recruiting talent, extending offers to startups, and directly engaging potential candidates on WhatsApp with lucrative pay packages reaching into the millions. Indeed, Meta’s extensive hiring efforts are believed to have sparked a talent competition within Silicon Valley.
Last month, Meta Platforms announced plans to invest $600 billion in U.S. infrastructure and job creation over the next three years, which includes the establishment of artificial intelligence data centers. Meta has intensified its focus on AI, aiming to achieve superintelligence. During the company’s recent earnings call, Zuckerberg stated that Meta is investing in computing resources because “it’s the right strategy to aggressively frontload capacity so we’re prepared for the most optimistic cases.” The company has projected “notably larger” capital expenditures for the upcoming year, driven by investments in artificial intelligence, which include the rapid construction of data centers to support its AI initiatives. Coincidentally, earlier this week, Zuckerberg revealed that Alan Dye, a veteran designer from Apple, will be joining Meta to spearhead a new creative studio within the Reality Labs division, concentrating on design, fashion, and technology. Dye will report to Andrew Bosworth, Meta’s chief technology officer, who oversees Reality Labs. “We’re entering a new era where A.I. glasses and other devices will change how we connect with technology and each other,” Mr. Zuckerberg remarked in a post on Threads. “With this new studio, we’re focused on making every interaction thoughtful, intuitive, and built to serve people.
The day Facebook rebranded itself as Meta
In October 2021, following 17 years of operating under the name Facebook, the social media behemoth that encompasses Facebook, Instagram, WhatsApp, and Oculus adopted a new identity. The corporate entity of Facebook transitioned to Meta. Mark Zuckerberg revealed this change during the company’s AR/VR-centric Connect event, stating that the new name better reflects the company’s fundamental goal: to create the metaverse.
