Mark Zuckerberg of Meta Platforms Inc. is expected to significantly cut resources devoted to building the so-called “metaverse”, a project he once regarded as the company’s future and the reason for changing the company’s name from Facebook Inc. to Meta Platforms Inc.
According to people familiar with the matter, Microsoft executives are considering cutting the budget of the company’s metaverse business unit by as much as 30% next year. The unit includes virtual world product Meta Horizon Worlds and the Quest virtual reality division. Because the plans involve internal company matters, these people requested anonymity. They said that such a significant cut is likely to include layoffs starting as early as January next year, but a final decision has not yet been made.
Meta confirmed that it has cut resources for its metaverse projects and said the saved funds will be used for other future projects of its Reality Labs division, including AI glasses and other wearable devices. “Given the momentum of AI glasses and wearable devices, we are shifting some of our investment from metaverse projects to these areas. Beyond that, we have no broader plans for adjustments,” a spokesperson said in a statement.
According to informed sources, the proposed cuts to the metaverse project are part of the company’s 2026 annual budget plan, which includes a series of meetings held last month at Zuckerberg’s residence in Hawaii. They added that Zuckerberg has asked Meta executives to seek a 10% across-the-board budget cut, which has been a standard requirement in similar budget cycles over the past few years.
Insiders revealed that as Meta has not witnessed the expected fierce competition in the metaverse technology field across the industry, the metaverse team has been asked to further cut expenses this year. They also said that the proposed reduction plan is likely to mainly target Meta’s virtual reality team, which accounts for the majority of metaverse-related expenditures. Additionally, Horizon Worlds will also face cuts.
The entire metaverse project has drawn close attention from investors and regulatory authorities. Investors believe that the project consumes a lot of resources, while regulatory authorities claim that children’s privacy and safety have been compromised in the virtual world. Meta’s share price rose by 3.4% to $661.53.
Although Zuckerberg has always firmly believed that people will eventually work and entertain in the virtual world, Meta’s vision of the metaverse has not been realized. In 2021, when Facebook was under public pressure due to user safety and privacy issues, Zuckerberg rebranded the entire company around the metaverse concept and began to invest heavily in this vision.
The metaverse team is part of Reality Labs, a division of Meta that focuses on long-term investments in VR headsets and AR glasses. Since the beginning of 2021, the team has lost more than 70 billion dollars. Zuckerberg has largely stopped mentioning the metaverse in public and during the company’s earnings calls, instead focusing on developing large AI models that support AI chatbots and other generative AI products, as well as hardware products more closely related to these experiences, such as Meta’s Ray-Ban smart display glasses.
Some analysts and investors have long called on Zuckerberg to spin off Reality Labs’ products, as they continue to consume resources but generate little revenue. In April this year, Mike Proulx, vice president of research and consulting firm Forrester, predicted that Meta would “shut down its metaverse projects, such as Horizon Worlds” by the end of the year.
At that time, in an email, he pointed out that Meta’s “Reality Labs division has been continuously incurring losses”, and stated that closing the metaverse project “will enable the company to focus more on its artificial intelligence projects, including Llama, Meta AI and AI glasses”.
Meta remains committed to developing consumer hardware and has recently hired a top design executive from Apple to assist.
