Meta is planning to cut its budget and is considering layoffs across its Metaverse division as part of that plan, according to people familiar with the matter.
The company is considering budget cuts of up to 30% within its Reality Labs division, which could affect employees working on its Horizon Worlds virtual space platform, according to people Business Insider spoke to. The person requested anonymity because he was not authorized to speak to the media about the matter.
Bloomberg earlier reported on the possibility of layoffs.
The news comes after a meeting last month at Meta CEO Mark Zuckerberg’s Hawaii compound, where he discussed strategy and plans for next year with executives, people familiar with the matter told Business Insider.
Internally, employees face uncertainty about whether planned cost reductions will ultimately lead to layoffs. Two other employees, who requested anonymity because they were not authorized to speak to the press, said directors told employees that most of the cuts would be covered by operating expenses. In addition to salaries, these expenses also include payments made by Meta to third-party studios to create games for Horizon.
Mehta declined to comment.
The review comes as Reality Labs has posted more than $60 billion in losses since 2020 and as Meta ramps up spending on AI this year in an increasingly competitive and expensive AI race.
Analysts at TD Cowen estimate that if Meta’s metaverse budget is reduced by about 30%, Reality Labs will save about $4 billion to $6 billion in 2026.
Analysts at BNP Paribas said the reported cuts could boost 2027 profit estimates by as much as a high single digit, and could rise further if Meta cuts company-wide spending. These moves indicate that Meta is willing to back away from some of Metaverse’s ambitions to focus on near-term AI opportunities, even though Meta is not clear on how much investors will ultimately spend on AI infrastructure, they said.
Meta’s stock price rose as much as 4% on Thursday morning, adding $69 billion to its market capitalization for a total of $1.68 trillion.
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This isn’t the first time Meta has reorganized its Metaverse division. In October, the company appointed Gabriel Aul, who led product at Meta Horizon, and Ryan Cairns, who previously ran virtual reality hardware, to co-lead the Metaverse effort, according to an internal memo written by Meta CTO Andrew Bosworth and obtained by Business Insider.
Vishal Shah, who helped lead Meta’s Metaverse initiative for the past four years, announced his move to Meta Superintelligence Labs in a separate memo in October. Meta announced Wednesday that it has hired Apple design lead Alan Dye to lead its new Reality Labs creative studio.
The company also reduced an undisclosed number of Reality Labs employees in April as part of a broader restructuring effort. The layoffs affected Oculus Studios, the gaming arm of the company’s Quest headset, and the team behind Supernatural, the VR fitness app that Meta acquired for more than $400 million.
Bosworth previously said in an internal memo in November 2024 that this year is “the most important year” in proving whether the Metaverse is a mythical feat or a “legendary misfortune.”
“We need to drive sales, retention and engagement across the board, but especially in mixed reality,” he wrote at the time, referring to mixed reality. “And for our long-term plans to have any chance, the mobile version of Horizon World absolutely has to break through. If you don’t feel the weight of history, you’re not paying attention.”
The losses Reality Lab has racked up have drawn scrutiny from investors. During Meta’s Q1 earnings call, Evercore analyst Mark Mahaney asked if Reality Labs’ losses would ever decrease, and if so, why and when. Zuckerberg pointed to the growing momentum of Meta’s Ray-Ban smart glasses, which he said are “really selling well” and just last year “sales tripled.”
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