Meta slows down on the Metaverse: Zuckerberg plans cuts of up to 30% and possible layoffs

After years of massive investments and disappointing results, the project that was meant to redefine the company’s future is being scaled back. AI returns to the center of the strategy.

Meta is preparing to significantly scale down its metaverse ambitions. According to internal sources, Mark Zuckerberg is considering cuts of up to 30% to the budget of the group dedicated to virtual worlds for 2026, a move that could result in layoffs as early as January. It’s a heavy decision, coming after years of major investments and outcomes far below expectations.

The reorganization emerged during a series of strategic meetings held at the CEO’s Hawaii compound last month. As usual, Zuckerberg requested a 10% cost reduction from all departments, but Reality Labs — the division that includes Horizon Worlds and Quest headsets — was asked to go further. The lack of strong competition in the sector and the slow adoption of the technology reportedly convinced top executives to trim a project that, until recently, represented the core of the company’s vision.

The metaverse, hailed in 2021 as the future of digital interaction, has over time turned into a money pit: Reality Labs has accumulated more than $70 billion in losses since 2021. Criticism from investors and regulators, limited user adoption, and concerns over child safety in virtual environments have further weakened the initial narrative.

It is therefore not surprising that Zuckerberg has gradually stopped promoting the metaverse publicly, shifting his focus instead to generative artificial intelligence and the hardware supporting it, such as Meta’s Ray-Ban smart glasses. Some analysts, like Mike Proulx from Forrester, have long argued that Meta should shut down its metaverse efforts to invest more heavily in AI.

Meanwhile, news of the cuts pushed Meta’s stock up 5.5% in pre-market trading - a sign that Wall Street approves of the shift in priorities. It remains to be seen whether this downsizing marks the end of the metaverse dream or merely a strategic pause along a longer-than-expected path.

Andrea Pelucchi