Remember when Mark Zuckerberg was so bullish on the metaverse that he literally renamed the entire company? Well, that enthusiasm appears to be cooling considerably. Meta Platforms Inc. (META) stock jumped Thursday after Bloomberg reported the company is preparing to slash funding for its metaverse efforts by up to 30%.
Here's the situation: Zuckerberg asked executives across Meta to identify 10% budget cuts during annual planning. Pretty standard efficiency drive stuff. But the metaverse team—which oversees Meta Horizon Worlds and the Quest virtual reality unit—is facing cuts three times deeper than everyone else. That's not a rounding error. That's a message.
The cuts could include layoffs as early as January, with most of the reductions hitting the virtual reality segment that accounts for the bulk of metaverse spending. Horizon Worlds, Meta's social VR platform, will also feel the pain.
The $70 Billion Experiment
Why the dramatic pullback? The metaverse division, part of Reality Labs, has incinerated over $70 billion since 2021. That's billion with a B. Investors have been increasingly vocal about the resource drain, while regulators have raised concerns about privacy and safety issues in virtual worlds. Perhaps most damaging: the report notes that competition and adoption in the virtual worlds market have come in well below expectations.
It turns out building a revolutionary new computing platform is hard, especially when people aren't exactly clamoring to spend their days as cartoon avatars in virtual conference rooms.
All In On AI
Meta has clearly shifted its public focus toward artificial intelligence and related hardware. The company's large language models and Ray-Ban smart glasses have generated far more buzz than anything happening in Horizon Worlds lately.
The numbers back up this strategic pivot. Meta stock has gained over 9% year-to-date as the company aggressively invests in AI ambitions while scaling back metaverse struggles. The company is committing more than $600 billion through 2028 to expand AI infrastructure, data centers, and workforce capabilities as it chases what Zuckerberg calls "personal superintelligence" for consumers.
In a related power move, Meta just hired Apple Inc.'s (AAPL) longtime human interface design chief, Alan Dye, who joins as Meta's chief design officer on December 31. Dye spent nearly two decades shaping the design of major Apple products, and his arrival signals Meta's commitment to strengthening its consumer hardware and AI push.
Meta stock traded 3.73% higher to $662.92 at last check Thursday. Apparently, investors like seeing Zuckerberg cut his losses and redirect resources toward the technology everyone actually seems excited about.
