Meta is expected to meaningfully cut resources for building the so-called metaverse, an effort CEO Mark Zuckerberg once framed as the future of the company. Bloomberg's Kurt Wagner discusses the news and the reason behind it with Caroline Hyde and Ed Ludlow on "Bloomberg Tech."

San Francisco

Meta's leadership recently convened to discuss budget plans for the upcoming year, with particular attention on reducing costs across various divisions. The metaverse division, once a central focus of CEO Mark Zuckerberg's vision, is facing potential cuts of up to 30%, which could include layoffs, though final decisions have not been made.

While Meta will continue to invest in virtual worlds, the company is shifting its emphasis toward augmented reality hardware, such as AI-powered Ray-Ban glasses. This move comes as the market for immersive virtual worlds has not developed as anticipated, and Meta seeks to prioritize hardware and AI projects.

Meta plans big cuts to its Metaverse efforts

Sounds like in the last few weeks last month Zuckerberg assembled leadership. They looked at the budget for next year and meta versus where they want to focus their cuts. Bring us your reporting. Yes. So this is an annual thing. Right. Looking ahead to 2026 budgets. In this case Mark Zuckerberg has a nice home in Hawaii where they have a series of meetings. Executives come in in the month of November. And to your point they talk about this year 10 percent cuts sort of across the board looking at all the different teams but that the metaverse has been asked to cut much more deeply than that. As much as 30 percent is currently being discussed. I should point out it hasn't been decided yet but a cut of 30 percent would certainly also come with layoffs. So to your point this is an effort that Mark Zuckerberg is touted as being the future of the company for years. So it's a pretty meaningful change there. Let's go back to when he thought it was the future of the company. Just take a listen to Mark Zuckerberg back in 2021. If we all work at it and within the next decade the metaverse will reach a billion people host hundreds of billions of dollars of digital commerce and support jobs for millions of creators and developers. Boy a lot has changed since then. And that was a long time ago. But we still will get what the idea that we'll have augmented reality. We're still focusing in on the glasses. It's just not the actual virtual worlds and working out. That's right. And the virtual worlds aren't going away to be clear. It's still going to be something that they invest in just not quite as aggressively as they had. And what was explained to me by sources this week is that part of that is that the market has not really materialized. You know I think they originally spent a lot of money building out this metaverse group thinking that they would have competition from others in the industry rushing towards a metaverse like product as well. That has not happened. And so it's not necessarily that Mark Zuckerberg no longer believes in this. I'm told that he still does. But clearly they have overspent to try to build this thing. And I think the ultimate goal is to get to these you know I inspired glasses and AR glasses and maybe the metaverse was a stepping stone to that all all the way. So actually it signals a commitment to a hardware distinct from metaverse hardware. I thought it was really interesting that shares of SLO Luxottica who they partner with to make the Ray Ban matters kind of rose a little bit after the story. And all of the analysts notes and there are many actually reacting to our report are reporting say this is probably bullish for AI spending. At the same time Bloomberg reporting that Apple's most senior design executive going to matter right. They are not giving up on hardware right. The V.R. virtual reality group is expected to be hit by these metaverse cuts. Right. That is the the immersive metaverse product. But they are still investing in an A.I. glasses the Ray Bans that you mentioned Ed. They are still obviously bringing in big talent and you know poaching people to design these things. This is what Mark Zuckerberg talks about on earnings calls A.I. He talks about the glasses. Those things are not going away. It is the specific kind of immersive virtual stuff that it looks like they're taking a second look at.

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New York

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Moscow

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California

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Pokrovsk

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New Orleans

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Breakdown