Meta Reportedly Plans Major Metaverse Budget Cuts as Focus Shifts Toward AI

Meta (META) is reportedly preparing to scale back its metaverse ambitions once again, with executives discussing budget cuts of up to 30% for the company’s metaverse division in 2026. According to a Bloomberg report, the proposed reductions would impact Reality Labs—the unit behind Horizon Worlds and the Quest VR headset line—and could include significant layoffs. The move signals Meta’s continued reassessment of the metaverse strategy it once positioned as the future of the company.

CEO Mark Zuckerberg has reportedly asked all departments to trim about 10% from budgets, a common directive in recent cycles. However, the metaverse team has been instructed to pursue much deeper cuts as adoption of virtual reality and metaverse platforms continues to trail expectations. Despite Meta’s multibillion-dollar investment and its highly publicized rebrand from Facebook to Meta in 2021, mainstream tech adoption of immersive VR environments has not accelerated as hoped.

The largest reductions are expected to hit the virtual reality group, which represents the bulk of Meta’s metaverse spending. Horizon Worlds, Meta’s flagship social VR platform, may also face scaled-down operations and reduced funding as the company shifts priorities.

Although Meta’s metaverse vision once captivated Silicon Valley—with companies snapping up virtual real estate and blockchain-based assets—the industry has since pivoted. Apple has leaned into spatial computing with the Vision Pro, Microsoft has pulled back its mixed-reality initiatives, and artificial intelligence has become the dominant competitive frontier.

Reality Labs has accumulated more than $70 billion in losses since 2021, highlighting the long-term financial strain of Meta’s metaverse push. Despite the news of potential cutbacks, Meta shares rose 4% on Thursday and are up more than 10% for the year, suggesting investor optimism about the company’s shift toward more profitable areas like AI.

These anticipated budget cuts reflect Meta’s ongoing effort to balance its long-term metaverse goals with current market realities and shifting technological trends.