Meta Intends to Reduce Metaverse Spending While Transitioning to AR Glasses

Social media titan Meta is reportedly looking to reduce its metaverse investments by as much as 30% and reallocate the funds towards virtual reality glasses and artificial intelligence.

No definitive decision has been reached, but budget reductions and potential layoffs are being considered for Meta’s Reality Labs division, primarily targeting its virtual reality segment, which accounts for the majority of metaverse-related expenditures, according to Bloomberg and The New York Times reported on Thursday.

Potential budget cuts could occur as early as January, but Meta intends to shift resources to a Reality Labs unit focused on developing augmented reality glasses.

Wall Street responded positively to this news, with Meta (META) shares initially jumping over 5% at market open on Thursday, before stabilizing around $661 for a 3.4% increase for the day.

Meta rebranded from Facebook in 2021 with the goal of creating a metaverse, investing billions into the research and development of virtual reality technology, although interest has waned as tech companies pivot towards AI advancements.

Competition around metaverse cools

Meta is streamlining its virtual reality segment as part of its annual budget preparation for 2026, partly due to the anticipated surge in the field not being as competitive as expected.

Sources indicated to Bloomberg and The New York Times that in 2021, Apple and Google were intensely developing competing virtual reality devices, but their efforts have since decelerated, reducing the competitive urgency for Meta executives.