According to PYMNTS.com, a new report from Bloomberg indicates Meta is considering a 30% budget cut for its metaverse group, which includes the Meta Horizon Worlds platform and the Quest VR unit. The proposed cuts are part of annual planning for 2026 and could trigger layoffs as soon as January. CEO Mark Zuckerberg has also asked for 10% budget reductions across the wider company. Since the start of 2021, the Reality Labs division housing the metaverse efforts has lost over $70 billion, with recent quarterly operating losses exceeding $4 billion. This shift comes as Meta pours billions into artificial intelligence, with Zuckerberg stating a goal to establish Meta as the leading frontier AI lab.
Reality Labs’ Reality Check
Here’s the thing: a 30% budget cut isn’t just a trim. It’s a major strategic retreat. For years, Zuckerberg bet the company—and its name—on the metaverse vision. But burning through $70 billion with little to show for it in terms of mainstream adoption or serious industry competition is a tough pill to swallow, even for Meta. Investors have been screaming about this for ages, and it seems the financial reality is finally forcing a harder pivot. The metaverse group, part of the broader Reality Labs organization, is now staring down the barrel of layoffs and a significantly constrained future. So what does this mean for the folks building Horizon Worlds or the next Quest headset? Uncertainty, basically. Their projects are no longer the undisputed crown jewels.
The AI Money Pit
And where is that money going instead? Look no further than AI. The report notes that capital expenditures for 2026 are expected to be “notably larger” than 2025, driven by data centers, cloud contracts, and AI talent. It’s a classic case of corporate resource reallocation: the new hot thing gets fed, and the old hot thing gets bled. Zuckerberg’s comments about a “leading frontier AI lab” and the new creative studio for AI glasses make the direction crystal clear. The metaverse isn’t being abandoned, but it’s being demoted from a “build it at any cost” moonshot to a line item that needs to justify its existence more rigorously. The question is, can a hobbled metaverse team still innovate enough to matter?
Stakeholder Whiplash
This creates whiplash for everyone involved. For developers who bet on Horizon Worlds as a platform, this is a red flag about long-term commitment. For enterprises that might have been exploring VR workspaces, it signals the technology is still in a volatile, experimental phase at its biggest champion. And for the market? It validates the skeptics who said the metaverse was a solution in search of a problem. Meanwhile, the sheer scale of investment shifting to AI is staggering. We’re talking about redirecting billions from one speculative frontier to another. But AI, at least, has immediate, tangible applications that advertisers and investors can understand today, not in some distant virtual future.
What Remains of the Vision?
So, is the metaverse dream dead at Meta? Not officially. But it’s being radically downsized. The recent move to merge metaverse design and art teams into the new AI-focused creative studio is telling. The vision is evolving from a purely VR-centric “metaverse” to one where AI and AR glasses might play the leading role. The hardware, like Quest, will likely live on, but the grand, all-encompassing virtual world ambition is getting a brutal reality check. Meta is still building for a future beyond the smartphone, but now it seems that future will be powered more by AI agents than by legless avatars in a sparsely populated virtual office. It’s a pragmatic, if painful, pivot.
