Meta is planning deep reductions to its metaverse budget next year, a move that signals the clearest shift yet in Mark Zuckerberg’s long-term strategy, the Financial Times reported. Executives at the $1.7tn social media giant have discussed cutting spending for the unit by as much as 30 per cent, a level that almost certainly guarantees layoffs across Reality Labs — the division responsible for Meta’s virtual worlds and hardware bets.
The news was met with relief on Wall Street. Investors have spent years questioning Meta’s vast, loss-making commitment to the metaverse, a project that produced little consumer enthusiasm and heavy financial strain. Shares rose sharply on the day of the announcement, briefly jumping 7 per cent before closing higher and adding about $60bn to the company’s valuation.
What Meta plans to scale back
The cost-cutting discussions target teams behind Horizon Worlds — Meta’s social VR universe — and the Quest headset line, which once formed the backbone of Zuckerberg’s metaverse vision. After years of technical hurdles, safety concerns and tepid user adoption, the company has struggled to justify the sheer scale of its investment. Reality Labs has accumulated more than $70bn in losses since 2021, making it one of the most expensive long-term bets in Silicon Valley history.
Insiders caution that the final cuts may shift, but the direction is unmistakable: the metaverse is no longer Meta’s priority.
AI wearables rise as the new strategic focus
The retrenchment comes just as Meta accelerates plans for a new generation of AI-powered hardware. This week Zuckerberg unveiled a dedicated design studio inside Reality Labs focused on advanced wearables, from smart glasses to wrist-based devices. To lead the effort, Meta recruited veteran Apple design executive Alan Dye — a hire that underscores the seriousness of the company’s push into AI-integrated consumer electronics.
Meta’s spokesperson confirmed the strategic rebalancing, saying the company is shifting investment “from Metaverse towards AI glasses and wearables, given the momentum there.” For Zuckerberg, these products are the bridge to a broader goal: developing everyday AI companions that operate far beyond smartphone interfaces.
How the metaverse morphed into an AI infrastructure play
When Zuckerberg rebranded Facebook to Meta in 2021, he pitched the metaverse as a vast avatar-filled digital realm where people would work, play and shop. Early prototypes, however, fell short of public expectations, and critics argued that the technology was years — if not decades — away from mainstream adoption.
Zuckerberg later reframed his vision, arguing that the company’s years of avatar research, spatial computing tools and virtual simulation environments would support ambitious AI projects. His new thesis is that AI “embodiment” — giving AI agents expressive, interactive digital identities — depends on investments originally made for the metaverse.
The bright spot: Smart glasses
Despite the turbulence, Reality Labs has produced one unexpected hit: Meta’s Ray-Ban smart glasses. The latest models integrate AI capabilities directly into the frames, offering seamless hands-free interactions. Usage has outperformed internal expectations, giving Meta its first genuinely promising foothold in wearable computing.
Zuckerberg now sees AI wearables as the platform that could eventually replace the smartphone — not just hardware, but a gateway for “personal superintelligence,” Meta’s term for advanced consumer-grade AI companions.
The cost of chasing “superintelligence”
To support this vision, Meta is spending heavily on AI compute infrastructure, recruiting elite researchers and open-sourcing increasingly powerful language and multimodal models. The ramp-up comes with financial risk. In October, Meta’s shares suffered one of their biggest one-day losses after Zuckerberg signalled even more aggressive AI spending ahead, rattling investors who still remember the metaverse years.
But internally, the company views the transition as existential. If Meta cannot lead in consumer AI platforms, executives believe Apple, Google or an emerging competitor will.
A company in strategic transition
The pivot has already sparked executive reshuffles, internal reorganizations and multiple rounds of layoffs. More restructuring is expected as Meta attempts to streamline operations around AI glasses, AR wearables and software ecosystems that support its next-generation assistants.
For Zuckerberg, the metaverse is no longer the destination; it is the scaffolding for what comes next. And in a year when every major tech company is fighting for AI dominance, Meta has made its choice clear: the future will be wearable, multimodal and powered by superintelligent agents — not virtual worlds.
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