Bloomberg reported on Thursday, citing people familiar with the matter, that Meta Platform Inc. (Meta) plans to cut the budget of its Metaverse project by up to 30%. The share price of the Facebook parent company rose 4%. The move eased some investors' concerns after CEO Mark Zuckerberg bet billions on the Metaverse, but the business has racked up losses of more than $60 billion since 2020. In 2021, the company even changed its name from Facebook to Meta to highlight the strategic priority of its Metaverse business.
Reports indicate that this Metaverse budget reduction plan is part of Meta’s annual budget planning for 2026. Last month, Zuckerberg held a series of meetings at his private estate in Hawaii to discuss related matters.
Reports say such drastic budget cuts are likely to be accompanied by layoffs, which could be implemented as early as January next year. Meta has not responded to Reuters' request for comment so far.
Craig Huber, an analyst at Huber Research Partners, said: "This is a smart move, but it comes too late. The current revenue outlook is obviously not as optimistic as management expected many years ago, and this adjustment seems to be to make costs match the revenue outlook, which is a major shift."
Meta’s Metaverse business is part of the “Reality Labs” division. The division produces Meta's Quest mixed reality headset, Ray-Ban smart glasses launched in partnership with Essilor Luxottica, and upcoming augmented reality glasses.
Meta has struggled to advance its vision of an "immersive metaverse" of interconnected virtual worlds, while also failing to expand its device market beyond the gaming community.
However, in the field of smart glasses, Meta has seized the first-mover advantage. In contrast, competitors such as Alphabet's Google, Apple, and Snap failed to fully tap the market potential in their early attempts.
News of the budget cuts comes as Meta is scrambling to stay competitive in Silicon Valley's artificial intelligence race amid poor response to its large language model, Llama 4.
To achieve its ambitious goals, Meta has committed up to $72 billion in capital spending this year. Overall, global spending by big tech companies on artificial intelligence is expected to reach about $400 billion this year.
Earlier this year, Meta integrated its artificial intelligence business into Superintelligence Labs. Zuckerberg personally took the lead in recruiting talent, not only issuing acquisition offers to startups, but also directly contacting potential candidates through WhatsApp and offering million-dollar salary packages.