According to Business Insider, Meta is planning budget cuts of up to 30% within its Reality Labs division, which could impact jobs and projects like the Horizon Worlds virtual spaces platform. This follows a recent executive strategy meeting at CEO Mark Zuckerberg’s Hawaii compound last month. The overhaul comes after Reality Labs has racked up staggering losses exceeding $60 billion since 2020, even as Meta ramps up spending in the competitive AI race. Internally, directors are telling employees the cuts will focus on operating expenses, including payments to third-party game studios for Horizon. In a related move, Meta just hired Apple design leader Alan Dye to lead a new Reality Labs creative studio, while veteran metaverse lead Vishal Shah transitioned to the AI-focused Superintelligence Labs in October.
Reality Check for Reality Labs
Here’s the thing: losing $60 billion is a number so big it’s almost abstract. But a 30% budget cut? That’s concrete. That’s the sound of a massive, painful pivot. Meta’s stock jumped 4% on this news, adding a cool $69 billion in market value. That tells you everything about what Wall Street thinks of the metaverse gamble versus the AI gold rush. Investors have been skeptical for years, and CTO Andrew Bosworth himself called this year the most critical to prove the metaverse isn’t a “legendary misadventure.” Now, with Zuckerberg doubling down on AI, it seems the patience for endless virtual world-building is wearing thin. The message is clear: the free-spending era for Reality Labs is over.
What This Means for Horizon and Developers
So what happens to Horizon Worlds and the people building for it? The immediate impact is uncertainty. If cuts hit operating expenses hard, that likely means less money flowing to the external studios Meta pays to create games and experiences for Horizon. That’s a direct hit to the platform’s content pipeline. For users, it could mean a slower trickle of new things to do, which is a problem for a platform that Bosworth said “absolutely has to break out.” It’s a vicious cycle: less investment might lead to lower engagement, which justifies further cuts. And let’s not forget the internal teams—this follows layoffs in April that hit Oculus Studios and the Supernatural VR fitness app. Morale in the metaverse division can’t be high.
The AI Elephant in the Virtual Room
This isn’t just about trimming fat. It’s a strategic reallocation. Every dollar saved from Reality Labs is potentially a dollar that can be poured into the insanely expensive AI infrastructure race. Zuckerberg is basically choosing his new battle. The executive shuffling says it all: key metaverse leaders like Vishal Shah are moving to the AI lab. But it’s not a total abandonment. Hiring a big-name Apple designer like Alan Dye is a fascinating move. It signals that if they’re going to keep spending in Reality Labs, it needs to be on polish, design, and user experience—maybe trying to make the hardware and software actually desirable, not just technologically ambitious. They’re trying to get leaner and smarter, but is it too late?
Is This the End of the Metaverse Bet?
Probably not, but it’s a massive scale-back. Zuckerberg will likely keep the core hardware and AI research going—the Ray-Ban smart glasses he mentioned are a bright spot. But the “build a whole digital universe” vision? That’s getting a harsh reality check. The metaverse, at least in the grandiose way Meta pitched it, is being de-prioritized. The focus now seems to be on mixed reality (MR) devices that blend with the real world and have clearer use cases, not necessarily on populating a virtual world called Horizon. Basically, the dream isn’t dead, but it’s being severely downsized. The weight of history, as Bosworth put it, is now a weight of financial reality.
