Meta Platforms is reportedly considering a significant reduction in its metaverse budget, potentially cutting up to 30% of its spending in this area. The company is contemplating reallocating these funds towards the development of virtual reality glasses and advancements in artificial intelligence. While no definitive decisions have been reached, the possibility of budget cuts and layoffs looms over Meta’s Reality Labs division, particularly targeting its virtual reality segment, which currently consumes a large portion of the metaverse budget. According to reports from Bloomberg and The New York Times, these cuts could be implemented as soon as January, with a focus on shifting resources to a Reality Labs team that is working on augmented reality glasses.
The market responded favorably to this news, as Meta's stock (META) initially surged by over 5% upon market opening on Thursday. The shares eventually stabilized at around $661, marking a 3.4% increase for the day. This response reflects investor optimism about the strategic redirection. Meta, which rebranded from Facebook in 2021 with a vision to create a metaverse, has invested heavily in virtual reality research and development. However, interest in this technology has waned as the tech industry shifts its focus towards artificial intelligence.
The competition in the metaverse arena has cooled, prompting Meta to reconsider its virtual reality investments as part of its budget planning for 2026. Initial expectations of a competitive surge in this technology have not materialized as anticipated. In 2021, companies like Apple and Google were aggressively developing virtual reality devices but have since decelerated their efforts, leading Meta executives to feel less urgency to advance rapidly.
Despite this shift, other companies continue to explore the metaverse. For instance, the AI startup Infinite Reality acquired Napster in March, with intentions to integrate a music-oriented metaverse. Additionally, DTTM Operations, owned by Donald Trump, applied for trademarks in February related to a metaverse and NFT marketplace centered on the former president's brand.
Although Meta seems to be stepping back from its metaverse ambitions, CEO Mark Zuckerberg announced via his Threads platform that the company is establishing a new creative studio within Reality Labs. This studio will concentrate on "design, fashion, and technology," particularly in the realm of AI glasses and related devices. "We’re entering a new era where AI glasses and other devices will change how we connect with technology and each other," Zuckerberg stated, emphasizing the importance of creating experiences that are intuitive and centered around users. The potential of these technologies is vast, and Meta aims to ensure that interactions are purposeful and user-focused through its new studio initiative.