Meta Platforms, the parent company of Facebook and Instagram, is reportedly planning to implement massive budget cuts of up to 30% for its ambitious metaverse initiative, according to a report from Bloomberg News on Thursday.
The news served as immediate relief for investors, sending Meta’s shares surging by nearly 4% in morning trading, as the move signals a major strategic pivot away from a costly long-term bet that has burned more than $70 billion since 2020.
The proposed cuts are part of the company’s annual budget planning for 2026, which included a series of executive meetings last month at CEO Mark Zuckerberg’s Hawaii compound. Cuts of this magnitude, which are expected to predominantly affect the Virtual Reality (VR) group and the Horizon Worlds social platform, would most likely include significant layoffs as early as January, though Meta has not officially confirmed the report.
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“Smart move, just late,” said Craig Huber, an analyst at Huber Research Partners. “This seems a major shift to align costs with a revenue outlook that surely is not as prosperous as management thought years ago.”
The metaverse efforts sit within the Reality Labs division, which is responsible for the company’s hardware—including the Quest mixed-reality headsets, smart glasses made with EssilorLuxottica (ESLX.PA)’s Ray-Ban, and upcoming augmented-reality glasses. The division has been a staggering financial drain, accumulating over $70 billion in cumulative losses since early 2021, and reported a loss of $4.4 billion in the most recent quarter alone.
While Meta has struggled to sell its vision of an immersive, interconnected metaverse to the mainstream, the division has achieved an early lead with its Ray-Ban smart glasses, finding a niche where competitors like Alphabet’s Google, Apple, and Snap have previously failed to capitalize. However, this success has not been enough to offset the enormous capital drain from the VR projects.
Shift to AI: The New $72 Billion Priority
The proposed metaverse cuts underscore a critical shift in the company’s focus: the Artificial Intelligence (AI) race. Meta is aggressively attempting to gain ground in Silicon Valley’s AI competition, especially after its highly anticipated Llama 4 model met with a poor reception from the developer and research communities. The model was criticized for being underwhelming on key benchmarks (like coding and complex reasoning), having a restrictive open-source license, and being perceived by some as a rushed release.
To fuel its new AI ambitions, Meta has committed as much as $72 billion in capital spending this year, contributing to the nearly $400 billion in total expected AI expenditure by large tech companies across the industry. The company has reorganized its AI efforts under Superintelligence Labs, with Zuckerberg personally leading an aggressive talent acquisition effort, reportedly floating million-dollar pay packages and directly courting top prospects on WhatsApp.
Centralized Support for Facebook, Instagram
In a separate move, Meta announced the launch of a new, centralized support hub for Facebook and Instagram users, acknowledging that its prior support options haven’t “always met expectations.” The hub aims to centralize account recovery options, offer clearer guidelines, and use new AI systems to help users report issues, recover lost accounts, and get answers via an AI-powered search and assistant.
The company claims its use of AI is improving user safety, noting that account hacks have decreased by over 30% globally across Facebook and Instagram. AI is also used to identify and stop other threats, such as phishing and suspicious logins, and has helped speed up the appeals process for mistakenly disabled accounts.
However, this official claim stands in contrast to the “lived experience of thousands of users” who complain of losing access to their accounts or business pages due to perceived system errors, with many suspecting the lack of human oversight in AI-driven decisions is to blame.
The severity of the issue has led to the creation of an entire Reddit forum dedicated to helping people who are suing Meta over these disabled accounts. Meta believes the new hub, which includes an optional selfie video verification for identity, will address these long-standing customer service problems.