Meta Redirects Funding from Metaverse to AI Glasses Initiatives
Meta has announced a strategic shift in its investment strategy, reallocating funds from the Metaverse to initiatives focused on AI glasses and wearable technology. This has come after reports indicate that the company’s Reality Labs division is facing budget cuts of up to 30%. Reality Labs oversees the development of various virtual and augmented reality technologies, including Quest headsets and smart glasses.
Budget Cuts and Strategic Shift
The budget cuts primarily target the virtual reality sector, notably affecting Horizon Worlds. These cuts have raised concerns among employees regarding job security and potential layoffs. Analysts predict that the reduced funding may also impact the support given to third-party developers for Horizon Worlds content creation.
Bloomberg was the first to report on the significant budget adjustments, which have since been corroborated by major news organizations, including The New York Times and Business Insider. Meta confirmed the shift in funding, emphasizing its commitment to advancing AI glasses and wearables over its Metaverse ambitions.
Meta’s Vision for the Future
Meta’s Chief Technology Officer, Andrew Bosworth, characterized 2025 as a pivotal year for Reality Labs, noting it would determine the success of their current initiatives. Bosworth stated that driving sales and user engagement across their products is crucial for long-term viability. The focus has now turned to launching an ultralight Horizon OS headset paired with a tethered compute puck, rather than pursuing a traditional Quest 4 model.
Recent Performance Metrics
Despite a peak in sales during the holiday season, quarterly performance data reveals a decline in Quest sales year-over-year for the first half of 2025. In contrast, the Ray-Ban Meta glasses have seen remarkable success, with sales tripling compared to the previous year. By the Q2 2025 earnings call in July, it was reported that sales of the smart glasses had more than doubled, and the company plans to increase annual production capacity to 10 million units by the end of 2026.
- Budget Cuts: Up to 30% reduction in Reality Labs funding.
- Focus Shift: Transitioning investment from Metaverse to AI glasses and wearables.
- Product Launches: Prioritizing ultralight Horizon OS headset for 2026.
- Ray-Ban Meta Sales: More than 200% growth in sales this year.
Market Dynamics and Competitive Landscape
Meta’s decision to pivot towards smart glasses comes amid rising competition from tech giants like Apple and Google. The company aims to solidify its leadership position in the smart glasses market ahead of these rivals. Despite struggling with the performance of Horizon Worlds, Meta continues to invest in tools to enhance the social capabilities of its platforms.
As the landscape of wearables evolves, Meta is determined to leverage its advancements in AI glasses, responding to both market demands and consumer interests. The upcoming years will be crucial for determining the successful transition from traditional virtual reality experiences to innovative wearable technologies.
