Meta Plans Deep Cuts to Metaverse, Shifts Spend Toward AI

Meta is planning deep cuts to its metaverse push, redirecting resources toward AI-powered wearables after years of heavy spending that failed to win mass adoption. The move signals a pragmatic shift by CEO Mark Zuckerberg as the company finalizes its 2026 budget.

What Happened

Meta is weighing reductions to its metaverse budget that could reach as much as 30% during the 2026 planning cycle, according to reporting first surfaced by Bloomberg and detailed by Reuters. Executives discussed the changes during budget meetings at Zuckerberg’s Hawaii compound last month, and cuts of that size would likely include layoffs as early as January, though final decisions haven’t been made. Budget reductions could reach 30% in 2026, and layoffs could arrive as early as January if the plan proceeds. Shares rose after the news, reflecting investor relief at a potential pullback. (reuters.com)

The contemplated reductions would hit Reality Labs—the unit behind Quest headsets and the Horizon Worlds platform—marking a notable retreat from the multi-year vision that drove the 2021 name change from Facebook to Meta. Shares rose about 4% on the news on December 4, underscoring a market preference for tighter discipline in loss-making projects. (reuters.com)

Why It Matters

Reality Labs has posted more than $60 billion in cumulative losses since 2020, and investors have pressed Meta to dial back spending on an initiative that has yet to break through with mainstream consumers. The company is increasingly steering money toward artificial intelligence and wearables, including smart glasses—part of a broader pivot that aligns strategy with products showing stronger momentum. (reuters.com)

The shift also fits with Meta’s recent communication to markets: leadership has warned that expenses will rise further to fund AI, from infrastructure to research, even as it reassesses lower-yield initiatives. That reframing—less metaverse, more AI—helps explain why investors welcomed the prospect of metaverse cuts despite Meta’s overall spending trajectory. (bloomberg.com)

The Bigger Picture

Meta’s potential retrenchment comes amid a wider reordering across Big Tech, where companies are prioritizing AI hardware, data centers, and applied AI products over bets with longer or murkier payoffs. Meta’s own guidance this fall pointed to “notably larger” capital expenditures in 2026 to support AI ambitions—a signal that any savings from metaverse efforts would likely be redeployed rather than banked. (bloomberg.com)

What’s Next

Watch for formal budget decisions in the coming weeks and any workforce moves in January. Investors will parse Meta’s next earnings update for fresh guidance on Reality Labs spending, the pace of AI investments, and the company’s roadmap for glasses and other wearables. A clearer allocation could set the tone for how Meta balances near-term returns with long-term bets in 2026. (reuters.com)

Sources

• Meta to cut up to 30% of metaverse budget, Bloomberg News reports — Reuters (December 4, 2025)
• Meta Plans to Shift Spending Away From the Metaverse — Wall Street Journal (December 5, 2025)
• Meta’s 2026 Plan to Spend Even More on AI Shakes Investors — Bloomberg (October 29, 2025)