Meta Platforms, the parent company of Facebook and Instagram, is preparing to sharply reduce spending on its once-flagship metaverse project in 2026, with internal discussions pointing to cuts of up to 30% for its Reality Labs division. The move signals a clear strategic shift by CEO Mark Zuckerberg from the ambitious virtual-world vision he championed in 2021 toward a full-throttle push into artificial intelligence and wearable devices.
Sources familiar with the plans say the reductions will affect teams working on Horizon Worlds (Meta’s main virtual reality social platform) and the Quest VR headset line-up. Job losses are expected to begin early next year. Investors greeted the news enthusiastically — Meta’s share price jumped as much as 7% in early New York trading before closing 3.4% higher, adding roughly A$90 billion to its market capitalisation in a single session.
The pivot comes after Reality Labs has burned through more than US$70 billion since 2021 with little commercial success to show for it. Technical glitches, safety concerns, and lukewarm consumer interest in avatar-based virtual worlds have dogged the project, prompting ongoing pressure from shareholders to rein in spending.
Just 24 hours before the budget-cut talks surfaced, Zuckerberg announced the creation of a new design studio inside Reality Labs dedicated to AI-powered wearables, including next-generation smart glasses. The company has already poached Apple’s high-profile design executive Alan Dye to lead the effort. Meta’s Ray-Ban Meta smart glasses have been one of the few bright spots for the division in recent years, giving management confidence that wearable AI devices — rather than fully immersive virtual worlds — represent the more realistic path to replacing the smartphone.
A Meta spokesperson confirmed the reallocation: “Within our overall Reality Labs portfolio we are shifting some investment from Metaverse towards AI glasses and wearables given the momentum there.”
For Australian investors, the development underscores a broader trend among U.S. tech giants: massive capital is now flowing into artificial intelligence infrastructure and talent rather than speculative long-term bets like the metaverse. While Meta’s overall AI spending is set to rise sharply in 2026, the trimming of metaverse losses should improve near-term profitability and cash flow — positive signals for a stock that has already more than tripled from its 2022 lows.
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