Meta’s Zuckerberg Plans Deep Cuts for Metaverse Efforts - Bloomberg.com

Meta's $70 Billion Reality Check: Zuckerberg Retreats from the Metaverse Mark Zuckerberg is pulling back from the virtual world he once believed would define the future of human interaction. Meta executives are considering potential budget cuts as high as 30% for the metaverse group next year, which includes the virtual worlds product Meta Horizon Worlds and its Quest virtual reality unit. Cuts that high would most likely include layoffs as early as January , according to people familiar with the discussions. The dramatic reversal comes just three years after Facebook transformed itself into Meta, a bold rebrand that signaled Zuckerberg's conviction that people would soon work and socialize in immersive digital environments. In 2021, as Facebook was facing fallout for user safety and privacy issues, Zuckerberg rebranded the whole company around the idea of the metaverse and started spending heavily on the vision . The gamble hasn't paid off. The Reality Labs division, which houses the metaverse efforts, has lost more than $70 billion since the start of 2021 . Despite massive investment, Meta's vision for the metaverse has not taken off despite Zuckerberg's conviction, which he still has, that people will one day work and play in virtual worlds . The proposed cuts emerged from annual budget planning for 2026, which included a series of meetings at Zuckerberg's compound in Hawaii last month . Wall Street celebrated the news with enthusiasm. Shares of Meta jumped as much as 5.7% after markets opened in New York, their biggest intraday gain since July 31 . The positive reaction reflects long-standing investor frustration with Reality Labs' persistent losses and limited revenue generation. The retreat doesn't mean Meta is abandoning hardware entirely. The company continues investing in its Ray-Ban smart glasses, which have shown more promising adoption than virtual reality headsets. They are still investing in AI glasses, the Ray-Bans. Those things are not going away . It is the specific kind of immersive virtual stuff that it looks like they're taking a second look at . The shift reflects broader industry realities. The market has not really materialized. They originally spent a lot of money building out this group thinking they would have competition from others in the industry rushing toward a metaverse like product . Instead, the tech world pivoted toward artificial intelligence, leaving Meta's virtual world ambitions looking increasingly isolated. Zuckerberg has largely stopped mentioning the metaverse in public and on company earnings calls, and is instead focused on developing the large AI models that underpin AI chatbots and other generative AI products . The budget reallocation allows Meta to channel more resources toward AI development, where competition with Google, OpenAI, and others intensifies daily. For the thousands of employees who built virtual worlds and VR experiences, the cuts represent a harsh awakening from Silicon Valley's most expensive dream. The metaverse may still arrive someday, but Zuckerberg's timeline was wildly optimistic. In tech's relentless pursuit of the next big thing, even $70 billion can't buy a market that isn't ready to exist.