Meta is preparing to make significant budget cuts to its metaverse project. Due to the increasing losses at Reality Labs and weak market response, the company is now shifting resources towards AI projects, which could change Meta's strategic direction.
America: Meta CEO Mark Zuckerberg has made a major decision regarding the company's ambitious 'dream project,' the metaverse. The company is now going to make substantial budget cuts to this project. This project, once considered Meta's future and which even led to Facebook being renamed Meta, now appears to be changing its direction.
The expenditure on the metaverse was continuously increasing, and the company was unable to achieve the expected market competitiveness. For this reason, Meta is now re-evaluating its priorities and planning to reallocate resources.
Biggest Cuts to the Metaverse Group
According to a Bloomberg report, internal company discussions suggest that the metaverse group's budget could be cut by up to 30% next year. This group includes Meta Horizon Worlds and the Quest VR unit, which are among the company's largest and most expensive projects. The report indicates that despite significant spending on metaverse initiatives, the expected results are not being achieved.
These cuts will be made under the company's 2026 annual budget plan. Typically, Mark Zuckerberg sets a target of approximately 10% budget cuts for all departments, but this time, the metaverse division has been asked for significantly deeper cuts. This indicates that the company no longer views this technology as promising as it once did.
Mounting Pressure on VR Unit
The report states that the deepest cuts are expected to hit Meta's Virtual Reality (VR) group. Most of the metaverse expenditure has been incurred by this group. Significant investments were made in developing Quest VR headsets and other hardware products, yet their market demand has not met expectations.
Furthermore, due to resource scarcity, the company might also implement layoffs starting in January. However, a final decision on this has not yet been made. Meta has already conducted several rounds of workforce reductions, and if these new layoffs are implemented, it could have a significant impact on the metaverse division.
Heavy Losses at Reality Labs Division
Meta's entire metaverse endeavor operates under the Reality Labs division. This team works on VR headsets, AR glasses, and other immersive hardware. Since the beginning of 2021, this division has incurred losses exceeding $70 billion. These losses were continuously increasing and putting significant pressure on the company's financial structure.
Why Such Significant Cuts?
A major reason for these cuts is Mark Zuckerberg's emphasis on AI. In recent months, he has publicly focused more on AI models, AI chatbots, and AI-based hardware such as Ray-Ban smart glasses. Mentions of the metaverse in the company's earnings calls have almost ceased.
Meta now wants to redirect its resources towards projects where it sees immediate market competitiveness and growth potential. AI projects like Llama, Meta AI, AI Glasses, and Chatbots have rapidly gained popularity in the past year, whereas the metaverse craze appears to be gradually diminishing.
