Meta announced a plan to reduce its 2026 Reality Labs budget by up to 30%, targeting virtual‑reality and Horizon Worlds units, with potential savings of $4‑$6 billion and layoffs that could begin in January.
The move follows a decade‑long investment in the metaverse that has generated more than $70 billion in losses since 2021, while Meta’s core advertising business continues to grow. By reallocating capital, Meta aims to accelerate AI‑powered ad tools and develop AI‑enabled smart glasses, which analysts view as higher‑margin, faster‑to‑market opportunities.
In Q3 2025, Meta reported revenue of $51.24 billion, up 26 % YoY, and a net income of $2.71 billion. Reality Labs posted a $4.4 billion operating loss for the quarter, a figure that underscores the financial pressure driving the budget cut. The company’s CEO, Mark Zuckerberg, said the company is “focused on building a leading frontier AI lab” and that “investment is moving away from metaverse‑focused projects toward AI glasses and wearables.”
The announcement was met with a positive market reaction, with Meta’s shares rising more than 5 % at the open and ending the day up 3.4 %. Analysts cited the shift away from a loss‑making venture toward a more profitable AI and hardware strategy as a key driver of the upbeat sentiment.
The budget reduction is expected to free up capital for AI research and development, potentially accelerating the launch of Meta’s next‑generation AI platform and expanding its wearable portfolio. The company also plans to streamline Reality Labs operations, which may reduce headcount and shift resources to high‑growth areas.
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