Meta Platforms is preparing for major reductions to its metaverse division as CEO Mark Zuckerberg pushes the company toward a more AI-focused future. According to individuals familiar with ongoing internal discussions, executives are weighing budget cuts of up to 30 percent for the team responsible for Meta Horizon Worlds and the company’s Quest virtual reality products. If approved, the reductions could lead to layoffs as early as January, though final decisions have not yet been made.
The potential cuts are part of Meta’s broader 2026 budget planning process, which included strategy meetings at Zuckerberg’s Hawaii compound last month. While Zuckerberg has asked most departments to identify roughly 10 percent in savings, the metaverse group was directed to propose significantly deeper reductions. Sources say the company no longer sees the level of competition or industry momentum around virtual reality that once justified its heavy spending.
Most of the proposed reductions would target Meta’s virtual reality hardware unit, which accounts for the largest share of Reality Labs’ costs. Horizon Worlds, the company’s social virtual environment, is also expected to face cutbacks. The restructuring comes after years of investor concerns about billions of dollars in ongoing losses tied to Reality Labs. Since 2021, the division has lost more than $70 billion, prompting analysts to question whether Meta should scale back or even abandon its metaverse ambitions.
Zuckerberg once described the metaverse as the company’s future and rebranded Facebook as Meta in 2021 to emphasize that shift. But the vision has struggled to gain traction, facing criticism from investors, regulators, and child-safety advocates. In recent months, Zuckerberg has spoken far less about the metaverse and instead highlighted the company’s progress in artificial intelligence, including development of large language models like Llama, Meta AI features, and smart glasses capable of integrating with AI systems.
Some analysts have argued for years that Meta should wind down Reality Labs entirely, suggesting that a pivot toward AI would deliver better returns and reduce financial risk. Research firm Forrester previously predicted that Meta might shutter Horizon Worlds by the end of this year, citing continued losses and disappointing adoption.
Despite the expected cutbacks, Meta remains committed to developing consumer hardware and recently hired Apple’s former top design executive to help guide its device strategy. Still, the proposed budget reductions mark the company’s most significant step yet toward distancing itself from the metaverse vision that once defined its long-term roadmap.
