In a significant strategic pivot, Meta Platforms is preparing to slash funding for its metaverse division by as much as 30% in 2026, redirecting resources toward artificial intelligence infrastructure and consumer wearables like advanced smart glasses.
The move, part of the company's annual budgeting process, reflects mounting pressure to curb losses in its Reality Labs unit after years of heavy investment yielded limited returns.
Reality Labs - the division responsible for Quest VR headsets, Horizon Worlds social platform, and augmented reality projects - has accumulated more than $70 billion in operating losses since early 2021.
Quarterly deficits have routinely exceeded $4 billion, with the unit generating only modest revenue from hardware sales and in-app purchases. For context, these cumulative losses rival the market capitalization of major corporations and dwarf the R&D budgets of most tech peers.
The deepest reductions are expected to target virtual reality initiatives, including the Quest lineup and Horizon Worlds, which have struggled to attract mainstream users despite technical improvements.
Analysts have long questioned the platform's viability; as early as April 2025, Forrester's Mike Proulx forecasted a potential shutdown of Horizon Worlds by year-end, citing persistent user disengagement and competition from more practical applications.
Meta executives attribute the pullback to slower-than-anticipated industry adoption. Major competitors like Apple, Google, and Microsoft have prioritized mixed-reality prototypes or AI integrations over fully immersive virtual worlds, leaving Meta as the primary big-tech spender in a niche that consumers have yet to embrace for work or socializing.
CEO Mark Zuckerberg, who famously rebranded the company from Facebook in 2021 to signal a metaverse-first future, has increasingly shifted public commentary toward AI superintelligence and wearable devices.
Saved funds will bolster development of AI-enhanced hardware, building on the surprise success of Ray-Ban Meta smart glasses. Partner EssilorLuxottica reported sales tripling year-over-year in the first half of 2025, validating lighter, everyday wearables over bulky headsets. Upcoming projects include prototypes like Orion AR glasses and next-generation models with real-time AI vision capabilities, positioned as the bridge to more practical augmented experiences.
Potential layoffs could begin as early as January 2026, primarily affecting metaverse-focused teams, though Meta insists it remains committed to long-term XR innovation. The company is not abandoning the metaverse entirely but adopting a more disciplined approach amid investor demands for profitability.
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This recalibration highlights a broader industry reality: while the metaverse captured imaginations in 2021, consumer behavior has favored AI tools and subtle wearables that enhance rather than replace real-world interactions. For Meta, once the undisputed leader in this space, the cuts mark a pragmatic acknowledgment that the horizon for virtual worlds may be further away than anticipated - freeing capital for battles in AI, where competition is fierce and immediate payoffs more tangible. As Zuckerberg pivots once again, the episode serves as a cautionary tale of how even the boldest tech visions must eventually confront market realities.
Author: Slava Vasipenok
Founder and CEO of QUASA (quasa.io) — the world's first remote work platform with payments in cryptocurrency.
Innovative entrepreneur with over 20 years of experience in IT, fintech, and blockchain. Specializes in decentralized solutions for freelancing, helping to overcome the barriers of traditional finance, especially in developing regions.
