Meta Reallocates Resources: Scaling Back Metaverse Spend for AI & VR Glasses

Key Takeaways

• Meta plans to reduce metaverse spending by up to 30%.
• Funds will be redirected to virtual reality glasses and artificial intelligence.
• Potential budget cuts and layoffs within Reality Labs.
• Wall Street reacted positively to the news.
• New focus on design and technology for VR glasses.

Social media giant Meta is reportedly planning to scale back its metaverse spending by up to 30% and redirect the funds into virtual reality glasses and artificial intelligence. No final decision has been made yet, but budget cuts and possible layoffs are on the table for Meta’s Reality Labs division, mainly aimed at its virtual reality unit, which consumes the bulk of metaverse-related spending, according to reports from Bloomberg and The New York Times on Thursday.

The budget cuts could be implemented as early as January, but Meta is intending to redirect the resources to a Reality Labs unit developing augmented reality glasses. Wall Street responded favorably to the announcement, with shares in Meta (META) initially surging over 5% upon market open on Thursday, before settling around the $661 mark to finish the day up by 3.4%.

Meta rebranded from Facebook in 2021 with the ambitious goal of constructing a metaverse. It has invested billions of dollars into the research and development of virtual reality technology, but interest in this area has waned as tech firms increasingly seek to capitalize on the burgeoning hype surrounding AI.

Metaverse Competition Cools

Meta's decision to curtail its virtual reality unit forms part of its annual budget planning for 2026, influenced in part by the fact that the anticipated intense competition in the metaverse space has not materialized as expected. Sources informed Bloomberg and The New York Times that in 2021, Apple and Google were aggressively pursuing the development of rival virtual reality devices. However, both companies have since moderated their efforts, leaving Meta executives feeling less compelled to aggressively push ahead.

Despite this, other companies remain committed to launching metaverse initiatives. The artificial intelligence startup Infinite Reality acquired the music-pirating-turned-streaming service Napster in March with plans to introduce a music-centric metaverse.

Meanwhile, DTTM Operations, owned by Donald Trump, filed for trademarks in February associated with a metaverse and NFT marketplace centered around the former US President’s brand.

Meta Prioritizes Virtual Reality Glasses

While Meta may be reducing its emphasis on the metaverse, CEO Mark Zuckerberg stated in a post on his X-like Threads platform on Wednesday that his company is establishing a new creative studio within Reality Labs, focusing on “design, fashion, and technology.”

“We’re entering a new era where AI glasses and other devices will change how we connect with technology and each other,” he said.

“The potential is enormous, but what matters most is making these experiences feel natural and truly centered around people,” Zuckerberg added. “With this new studio, we’re focused on making every interaction thoughtful, intuitive, and built to serve people.”