Meta Pulls Back on Metaverse Spending as Zuckerberg Goes All-in on AI

With input from the Financial Times, Bloomberg, Reuters, CNBC, and Business Insider.

Meta is getting ready to dramatically scale back its once-hyped metaverse push, as CEO Mark Zuckerberg pivots the company’s attention — and billions of dollars — toward artificial intelligence.

Executives at the $1.7 trillion social media giant are considering cutting the metaverse division’s budget by as much as 30%, according to people familiar with the talks. The reductions would likely come with job cuts starting early next year and would hit teams working on Horizon Worlds and the company’s Quest virtual reality headsets the hardest.

The news was music to Wall Street’s ears. Meta’s stock jumped about 4% Thursday, adding roughly $60–$70 billion to the company’s market value as investors cheered the pullback from a project that has burned cash for years.

Meta declined to comment on the reports, which were first published by Bloomberg.

Zuckerberg famously rebranded Facebook to Meta in 2021, pitching the metaverse as the future of online life — a place where people would work, socialize, shop and play inside immersive virtual worlds.

That vision never fully caught on with consumers. Technical issues, safety concerns and weak demand slowed adoption, while investors grew increasingly uneasy about the price tag. Since late 2020, Meta’s Reality Labs division has racked up more than $70 billion in losses, making it one of the most expensive long-term bets in Silicon Valley history.

The cuts now under discussion are part of Meta’s 2026 budget planning, including a series of high-level meetings held at Zuckerberg’s Hawaii compound last month. Executives across the company were asked to find 10% cuts, but the metaverse group was targeted for deeper reductions because competition and growth in the space never materialized as expected.

The timing of the potential cuts is no accident. Just a day earlier, Zuckerberg announced the creation of a new design studio inside Reality Labs focused on AI-powered wearable devices, including smart glasses. Meta recently hired a top Apple design executive to lead that effort.

Zuckerberg has been slowly linking the company’s future less to virtual worlds and far more to AI “superintelligence,” open-source models, chatbots and wearable tech. He now argues that AI-powered glasses could eventually replace smartphones as the dominant computing platform.

Meta is pouring staggering sums into that bet. The company has committed up to $72 billion in capital spending this year alone, much of it tied to AI infrastructure and talent. It recently reorganized its AI efforts into a new Superintelligence Labs group, with Zuckerberg personally leading aggressive recruiting — including million-dollar offers to top researchers.

Markets clearly like the shift. Meta shares surged after the metaverse cutback leaked, signaling renewed confidence in management’s cost discipline and AI strategy.

Still, some skepticism remains. Just two months ago, Meta’s stock suffered its second-largest one-day loss ever — wiping out more than $200 billion in value — after Zuckerberg warned investors that AI spending would ramp up even further next year.

In other words: Wall Street is happy to see the metaverse shrink, but still wary of how expensive the AI race could become.

For now, though, the message is clear — the era of Meta betting its future on virtual worlds is fading fast. The company that once staked its identity on the metaverse is now firmly planting its flag in artificial intelligence instead.