Meta shares shot up 4% Thursday after Bloomberg reported CEO Mark Zuckerberg is planning deep cuts to the company's metaverse division. The move signals a potential strategic retreat from the virtual reality bet that's cost the company over $70 billion since 2020, as investors cheer the prospect of reduced losses from Reality Labs.
Meta just gave investors exactly what they wanted to hear - and it has nothing to do with building virtual worlds. The company's stock popped 4% Thursday after Bloomberg reported that CEO Mark Zuckerberg is eyeing significant cuts to the metaverse division that's been bleeding cash for years.
The potential cuts could slash as much as 30% from Reality Labs' budget, according to people familiar with internal discussions. For a unit that just posted a $4.4 billion quarterly loss, that's music to Wall Street's ears. The proposed reductions would likely include layoffs and primarily target Meta's virtual reality operations as the company plans its 2026 budget.
It's a striking about-face for the company that literally renamed itself from Facebook to Meta in October 2021. Back then, Zuckerberg declared the metaverse "the next frontier just like social networking was when we got started." That bold vision came with an expensive price tag - Reality Labs has torched over $70 billion in cumulative losses since late 2020.
The timing isn't coincidental. While Meta's been pouring billions into VR headsets and virtual worlds, the AI boom has completely reshaped Silicon Valley's priorities. OpenAI sparked a generative AI gold rush that's made every tech giant scramble to prove their AI credentials. Meta's been no exception, with Zuckerberg increasingly positioning the company as an AI leader rather than a metaverse pioneer.
Investors have been vocal about their frustration with Reality Labs' mounting losses. The division develops Meta's Quest VR headsets and those Ray-Ban smart glasses, but adoption has remained tepid despite years of investment. Meanwhile, Meta's core advertising business continues printing money, making the metaverse losses even more glaring on quarterly earnings calls.
The reported cuts would represent the most significant pullback from metaverse investments since Meta's pivot. While the company hasn't completely abandoned virtual reality - those Ray-Ban smart glasses have shown some promise - the scale of potential reductions suggests Zuckerberg is finally bowing to shareholder pressure.
