Mark Zuckerberg plans big cuts to Meta’s Metaverse projects to focus on AI and generative tech

Mark Zuckerberg, the CEO of Meta Platforms Inc., is reportedly poised to implement significant budget reductions for the company's metaverse projects, which he previously envisioned as the cornerstone of Meta's future. According to sources cited by Bloomberg, executives are contemplating a budget cut of up to 30% for the metaverse division in the upcoming year, impacting initiatives such as Meta Horizon Worlds and the Quest virtual reality unit. The metaverse team has been instructed to make deeper cuts this year due to a lack of the anticipated competitive landscape in the technology sector. While layoffs could occur as early as January, no final decisions have been reached yet. These proposed reductions are part of Meta's financial planning for 2026, with discussions having taken place at Zuckerberg's Hawaii retreat last month. Zuckerberg has requested that all teams identify approximately 10% in savings, a typical request in previous years. The bulk of these reductions is expected to target the virtual reality sector, which represents a significant portion of the metaverse's expenditures, including potential impacts on Horizon Worlds. The metaverse initiative has faced scrutiny from investors, who view it as a resource drain, as well as from regulatory bodies concerned about safety and privacy issues for children in virtual environments. Following the news, Meta’s stock saw a 5.5% increase in premarket trading in New York. A spokesperson for the company declined to provide any comments on the matter. Despite Zuckerberg's initial optimism about the metaverse, it has not garnered the traction he anticipated. In 2021, after facing backlash over user safety and privacy, he rebranded the company around the metaverse and ramped up investments. The metaverse division, part of Reality Labs, has incurred losses exceeding $70 billion since 2021. In recent times, Zuckerberg has shifted his public focus away from the metaverse, directing attention instead to large AI models for chatbots and generative AI, as well as hardware innovations like Meta's Ray-Ban smart display glasses. Analysts and investors have suggested for some time that Meta should consider scaling back Reality Labs projects that are financially draining without generating substantial revenue. In April, Mike Proulx, a vice president at the research firm Forrester, predicted that Meta might discontinue its metaverse projects, such as Horizon Worlds, by year-end, labeling the Reality Labs division as a 'leaky bucket.' He emphasized that halting metaverse initiatives would allow Meta to concentrate more on its AI ventures, including Llama, Meta AI, and AI glasses. Recent efforts show Meta's commitment to consumer hardware, highlighted by the hiring of Apple’s former top design executive to guide future product developments.