Meta is planning budget cuts and considering job cuts as part of that across its metaverse unit, according to a person familiar with the matter.
The company is considering budget cuts of up to 30% within its Reality Labs division, which could impact employees working on its virtual spaces platform, Horizon Worlds, according to the person Business Insider spoke to. The person requested anonymity because they’re not authorized to speak to the press on these matters.
Bloomberg earlier reported on the potential cuts.
The news follows a meeting last month at Meta CEO Mark Zuckerberg’s Hawaii compound, where he discussed strategy and next year’s plans with executives, the person familiar with the matter told Business Insider.
Internally, employees face uncertainty about whether the planned cost cuts will ultimately lead to layoffs. Directors are telling employees that most of the reductions will come from operating expenses, according to two other employees, who asked to remain anonymous because they’re not authorized to speak to the press. In addition to salaries, these expenses include payments made by Meta to third-party studios to create games for Horizon.
Meta declined to comment.
The overhaul comes on the back of Reality Labs racking up losses of over $60 billion since 2020 and Meta ramping up its AI spending this year in an increasingly competitive — and expensive — AI race.
Analysts at TD Cowen estimated that a cut of around 30% to Meta’s metaverse budget could translate into roughly $4 billion to $6 billion in cost cuts for Reality Labs in 2026.
BNP Paribas analysts said the reported reductions could lift their 2027 earnings estimates by as much as the high single digits — and even more if Meta trims spending across the rest of the company. They said that the moves show Meta is willing to pull back on some of its metaverse ambitions to focus on nearer-term AI opportunities, even as investors lack clarity on how much it will ultimately spend on AI infrastructure.
Meta’s stock rose as much as 4% Thursday morning, adding $69 billion to its market cap and bringing its total value to $1.68 trillion.
Meta’s metaverse metamorphosis
It’s not the first time that Meta has reorganized its metaverse unit. In October, it tapped Gabriel Aul, who led products for Meta Horizon, and Ryan Cairns, previously in charge of virtual reality hardware, to co-lead its metaverse efforts, according to an internal memo Meta CTO Andrew Bosworth wrote, which was obtained by Business Insider.
Vishal Shah, who helped lead Meta’s metaverse initiatives over the past four years, announced in a separate October memo that he is transitioning to Meta Superintelligence Labs. On Wednesday, Meta announced that it has hired Apple design leader Alan Dye to lead a new Reality Labs creative studio.
The company also cut an undisclosed number of Reality Labs employees in April as part of a broader restructuring effort. The cuts affected Oculus Studios, the company’s in-house gaming division for Quest headsets, as well as the team behind Supernatural, the VR fitness app that Meta acquired for over $400 million.
Bosworth previously described this year as the “most critical” to proving whether the metaverse is either a visionary feat or a “legendary misadventure,” he wrote in a November 2024 internal memo.
“We need to drive sales, retention, and engagement across the board but especially in MR,” he wrote at the time, referring to mixed reality. “And Horizon Worlds on mobile absolutely has to break out for our long-term plans to have a chance. If you don’t feel the weight of history on you, then you aren’t paying attention.”
The losses racked up by Reality Labs have drawn investor scrutiny. In Meta’s first-quarter earnings call, Evercore analyst Mark Mahaney asked whether Reality Labs losses would ever come down, and if so, why and when. Zuckerberg pointed to the rising momentum behind Meta’s Ray-Ban smart glasses, saying they’ve “really taken off” and just “tripled in sales” in the last year.
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