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

Meta Platforms Inc. CEO Mark Zuckerberg is expected to cut back on spending for the metaverse, the virtual world project he once called the future of the company and the reason for renaming Facebook Inc, as reported by Bloomberg. 

Executives are considering budget cuts as high as 30% for the metaverse group next year. This includes Meta Horizon Worlds and its Quest virtual reality unit, according to people familiar with the talks. “The metaverse group was asked to cut deeper this year given that Meta has not seen the level of industry-wide competition over the technology that it once expected,” the sources said. The cuts could include layoffs as early as January, though no final decision has been made.

The proposed reductions are part of Meta’s 2026 budget planning. The meetings included discussions at Zuckerberg’s Hawaii compound last month. He has asked all teams to find about 10% in savings, which has been the standard request in past years, the sources added.

Most of the cuts are expected to hit Meta’s virtual reality group, which accounts for the bulk of metaverse spending. Horizon Worlds is also likely to be affected.

The metaverse effort has drawn criticism from investors, who see it as a drain on resources, and from watchdogs, who have raised concerns about children’s safety and privacy in virtual worlds. After Bloomberg’s report, Meta shares jumped 5.5% in premarket trading in New York. A company spokesperson declined to comment.

Meta’s metaverse vision has not gained the traction Zuckerberg hoped for, though he still believes people will one day work and play in virtual worlds. In 2021, as Facebook faced criticism over user safety and privacy, he rebranded the company around the metaverse and began spending heavily on it.

The metaverse group is part of Reality Labs, Meta’s division for long-term projects like VR headsets and AR glasses. The division has lost more than $70 billion since 2021. Zuckerberg has largely stopped talking about the metaverse in public and on earnings calls. He is now focusing on large AI models for chatbots and generative AI, along with hardware like Meta’s Ray-Ban smart display glasses.

Some analysts and investors have long suggested that Meta cut Reality Labs projects that drain money without bringing in much revenue. In April, Mike Proulx, vice president at research firm Forrester, predicted Meta would “shutter its metaverse projects, like Horizon Worlds” before the end of the year. “Reality Labs division continues to be a leaky bucket,” he said. “Shuttering metaverse efforts would allow the company to give more focus to its AI projects including Llama, Meta AI, and AI glasses.”

Meta remains committed to consumer hardware and recently hired Apple’s top design executive to help with future products.