Meta Reduces Reality Labs Budget to Focus on AI Expansion
Meta is making strategic budget cuts within its Reality Labs division, which focuses on the metaverse. According to sources familiar with the situation, these cuts could reach up to 30%. This move could directly impact employees involved in Horizon Worlds, Meta’s virtual spaces platform.
Details of Budget Cuts and Employee Uncertainty
Recently, during a strategic meeting at Meta CEO Mark Zuckerberg’s Hawaii compound, executives discussed future plans and strategies. Employees are concerned about potential layoffs resulting from these budget reductions. Directors are informing workers that many cuts will target operating expenses, which include salaries and payments to third-party studios involved in creating games for Horizon Worlds.
Shifting Focus from Metaverse to AI
A Meta spokesperson confirmed that the company is reallocating investments within its Reality Labs portfolio. The emphasis is shifting from metaverse projects toward artificial intelligence (AI) glasses and wearables. This decision comes amid Reality Labs reporting losses exceeding $60 billion since 2020 and signifies a growing focus on AI in a highly competitive landscape.
- Possible budget reduction: 30% in Reality Labs
- Estimated cost cuts: $4 billion to $6 billion in 2026
- Impact on company earnings: Possible increase in 2027 earnings estimates by high single digits
- Meta’s current market cap: $1.68 trillion
- Stock rise: 4%, adding $69 billion to market value
Recent Developments in Reality Labs
This is not the first restructuring for Meta’s metaverse unit. In October, new leadership was appointed, including Gabriel Aul and Ryan Cairns, to co-lead metaverse initiatives. Meanwhile, Vishal Shah transitioned to the Meta Superintelligence Labs.
Additionally, the company hired Apple design leader Alan Dye to spearhead a new creative studio within Reality Labs. In April, Meta also reduced the workforce in Reality Labs as part of broader restructuring efforts, affecting both Oculus Studios and the team behind the VR fitness app Supernatural.
Investor Sentiment and Future Directions
Investor scrutiny has increased due to the significant losses sustained by Reality Labs. Analysts are questioning if and when these financial losses will subside. Mark Zuckerberg pointed to the sales growth of Meta’s Ray-Ban smart glasses as a sign of success, noting that sales tripled over the past year.
As Meta navigates this transformation, it appears committed to refining its focus and resources on promising near-term AI opportunities while reconsidering its overall approach to the metaverse.
