In a significant strategic pivot, Meta is reportedly preparing to drastically scale back its once-core "metaverse" ambitions. This move signals a retreat from the immersive virtual world vision that prompted the company's high-profile rebranding from Facebook just a few years ago, as leadership now appears to be reallocating resources toward the more immediate and lucrative field of artificial intelligence.
Major Budget Reductions on the Horizon for Reality Labs
According to a report from Bloomberg, citing sources familiar with the matter, Meta executives are considering budget cuts of up to 30% for its metaverse-focused division, Reality Labs, as part of its planning for the upcoming fiscal year. These cuts, which could be enacted as soon as January, are expected to heavily impact key projects like the virtual social platform Horizon Worlds and the Quest virtual reality hardware division. Such a substantial reduction in spending is likely to precipitate another round of layoffs within these teams, though final decisions are still being deliberated. This potential downsizing follows a broader company directive from CEO Mark Zuckerberg, who reportedly asked all divisions to identify cost-saving opportunities, with the metaverse unit singled out for particularly deep cuts.
Reported Financial Impact of Meta's Reality Labs (2021-2025):
- Cumulative Losses: Exceed USD 70 billion (approx. CNY 4950.6 billion).
- Proposed Budget Cut: Up to 30% for the upcoming fiscal year.
- Potential Consequence: Layoffs beginning as early as January 2026.
The Costly Bet That Failed to Materialize
The planned cuts underscore the immense financial burden the metaverse initiative has placed on Meta. Since 2021, the Reality Labs division has accumulated staggering losses exceeding USD 70 billion (approximately CNY 4950.6 billion). This massive investment was intended to pioneer a new computing platform and social frontier, but the technology has largely failed to ignite the widespread industry adoption and competitive "arms race" that executives had anticipated. Investors have long expressed concern over this relentless spending, and the division's persistent lack of profitability has made it a prime target for cost-cutting, especially as Meta seeks to fund its ambitious and expensive push into generative AI.
Reported Areas Targeted for Cuts:
- Meta Horizon Worlds: The company's flagship virtual social platform.
- Quest Virtual Reality Division: The hardware and software unit responsible for VR headsets.
A Strategic Pivot from the Metaverse to AI
The budget deliberations reflect a clear and public shift in Meta's strategic priorities. In recent earnings calls and public appearances, Mark Zuckerberg has notably downplayed mentions of the metaverse, instead emphasizing the company's work on large language models like Llama, its Meta AI assistant, and AI-powered hardware such as its Ray-Ban smart glasses. Analysts, including Forrester's Mike Proulx, have predicted this shift for months, suggesting that closing costly metaverse projects would allow the company to concentrate its "energy and resources" on its AI product lines, which are seen as having more tangible near-term potential.
Strategic Context & Analyst Commentary:
- Shift in Focus: Company leadership is publicly emphasizing AI (Llama models, Meta AI, AI glasses) over the metaverse.
- Analyst View (Forrester): Reality Labs has been described as "a leaky bucket," with resources better spent on AI development.
The Uncertain Future for VR and Horizon Worlds
While the core technology of virtual and augmented reality may continue in some form, the specific fate of Horizon Worlds appears increasingly bleak. The platform, criticized for its underwhelming graphics and sparse user engagement, has become a symbol of the metaverse's struggles. If the cuts proceed, it could face a severe reduction in support or even shutdown. For the broader VR hardware business, the outlook is mixed. Devices like the Quest 3 have been praised by enthusiasts for their affordability and capability, but as a niche product, they have not generated sufficient revenue to justify Reality Labs' enormous losses, especially when compared to the market enthusiasm surrounding AI.