Mark Zuckerberg is proposing steep cuts to Meta’s metaverse effort as the company is shifting focus and capital toward AI and AI-linked hardware.
This move signals a major strategic shift for Reality Labs and the future of Horizon Worlds and Quest.
This pivot marks a decisive turning point for a company that renamed itself to capture the next computing platform.
After pouring more than $70 billion into Reality Labs since 2021 with limited mainstream success, reports of budget reductions as high as 30% signal to investors that Meta is finally prioritizing near-term returns in artificial intelligence.
From vision to reality check: Why Meta is reining in the Metaverse
The decision to scale back comes after years of unchecked spending collided with underwhelming adoption.
Reality Labs has burned through cash at a staggering rate, posting operating losses of approximately $4.4 billion in the most recent quarter alone.
Despite the massive investment, platforms like Horizon Worlds have struggled to retain users, remaining a niche interest rather than the digital town square Zuckerberg envisioned.
According to people familiar with the matter, the proposed cuts, which could slice the division’s budget by up to 30%, were crystallized during recent planning sessions in Hawaii.
Insiders describe a “reality check” moment where leadership acknowledged that the timeline for a profitable metaverse is stretching further into the future than investors will tolerate.
Betting on AI
The capital retreated from virtual reality is not being saved; it is being redeployed into the company’s aggressive AI offensive.
Meta is shifting its hardware strategy away from bulky VR headsets toward lighter, AI-integrated wearables, a move validated by the surprise success of its Ray-Ban smart glasses.
To lead this new design-centric era, Meta has reportedly poached former Apple design executive Alan Dye to head a new creative studio, a clear signal that future hardware will be built as a vessel for Meta AI rather than just a portal to a virtual world.
Investors have cheered the discipline. By channeling resources into Llama (its large language model) and tangible AI products, Meta is chasing revenue streams that are materializing today, not a decade from now.
However, analysts warn that this pivot carries risks: by pulling back on the metaverse now, Meta effectively cedes its “first mover” advantage in spatial computing just as competitors like Apple continue to iterate.
All eyes will be on Meta’s January earnings call for confirmation of the specific budget impacts.
If the cuts to Reality Labs are as deep as reported, expect a significantly revised product roadmap that emphasizes “smart” overlays and AI agents over immersive virtual worlds.
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