Mark Zuckerberg plans deep cuts to metaverse division as Meta shifts focus to AI

Mark Zuckerberg, the CEO of Meta Platforms Inc., is reportedly planning significant reductions in funding for the metaverse initiative, an effort he once championed as the future of the company. According to sources familiar with internal discussions, Meta executives are contemplating budget cuts of up to 30% for the metaverse division in the upcoming year. This division includes products like Meta Horizon Worlds and the Quest virtual reality platform. These potential cuts, which may involve layoffs as soon as January, are part of the company's broader budget planning for 2026. Last month, a series of meetings at Zuckerberg's Hawaii residence focused on these financial adjustments. Historically, Zuckerberg has asked for a 10% reduction across various departments, but this year, the metaverse group has been instructed to implement deeper cuts due to a lack of anticipated competition in the technology sector. The majority of the reductions are expected to impact the virtual reality segment, which constitutes a significant portion of the metaverse's expenditures. Critics, including investors, have expressed concerns that the metaverse project has become a drain on resources, with additional scrutiny over issues related to privacy and safety for children in virtual environments. In reaction to these developments, Meta's stock experienced a 5.5% increase in premarket trading. Despite Zuckerberg's unwavering belief in the future of virtual worlds for work and play, the metaverse vision has failed to gain traction. Following the rebranding of Facebook to Meta in 2021, the company invested heavily in this vision amidst ongoing user safety and privacy challenges. The metaverse division operates under Reality Labs, which focuses on long-term projects such as VR and AR technologies. However, this segment has incurred losses exceeding $70 billion since early 2021. Recently, Zuckerberg has shifted his public focus toward the development of substantial AI models that power chatbots and generative AI technologies, as well as related hardware like Meta's Ray-Ban smart glasses. Analysts have long suggested that it may be wise for Zuckerberg to divest from Reality Labs due to its continuous financial drain without significant revenue returns. In April, industry expert Mike Proulx predicted that Meta might close its metaverse projects, including Horizon Worlds, by year's end. He described the Reality Labs division as a 'leaky bucket,' emphasizing that reallocating resources toward AI initiatives could be more beneficial for the company. While Meta remains committed to consumer hardware development, they have recently recruited Apple's former chief design officer to aid in these efforts.