Meta Shares Rise After News of Possible 30% Budget Cut to Metaverse

Summary:
Meta, the parent company of Facebook, is considering cutting its metaverse budget by up to 30% to reallocate resources towards virtual reality glasses and artificial intelligence. Although no final decisions have been made, budget reductions and potential layoffs in the Reality Labs division are under discussion. The news has positively affected Meta's share prices, which surged following the reports.

Key Takeaways

Meta plans to potentially reduce metaverse spending by 30%, reallocating funds to focus on virtual reality and AI.
The anticipated budget cuts could be implemented as early as January.
Shares of Meta rose over 5% upon the news and settled at a 3.4% increase.
Competition in the metaverse market has decreased, affecting Meta’s strategies.
Meta is launching a new creative studio dedicated to developing AI glasses.

Meta shares climb on report of possible 30% metaverse budget cut

Meta's Strategic Shift

Social media powerhouse Meta is reportedly looking to reduce its metaverse spending by as much as 30%. This change aims to shift financial resources towards the development of virtual reality headsets and artificial intelligence, as reported by Bloomberg and The New York Times. While no conclusive decisions have been reached, discussions around budget cuts and potential layoffs in Meta's Reality Labs division, especially within its virtual reality unit, are underway.

The anticipated budget cuts could occur as early as January, with plans to redirect resources into a Reality Labs unit focused on augmented reality glasses. As a result of this projected shift, Wall Street reacted favorably, with Meta's shares (META) seeing an initial increase of over 5% when the market opened on Thursday, ultimately gaining 3.4% throughout the day and stabilizing around the $661 mark.

Meta shares initially spiked over 5% when the market opened on Thursday. Source: Google Finance

Cooling Competition in the Metaverse

Meta's decision to cut back on its virtual reality department is part of its annual budgeting process for 2026. The company has noticed that the expected rush toward metaverse technology has been less competitive than anticipated. Sources indicated that although Apple and Google were once rapidly developing competing virtual reality devices, their progress has slowed, alleviating some competitive pressure on Meta.

Despite the cooling competition, other companies continue to make strides in building metaverse platforms. Notably, the AI startup Infinite Reality acquired the music streaming service Napster in March to create a music-oriented metaverse experience. Additionally, DTTM Operations, a company owned by Donald Trump, filed for trademarks related to a metaverse and NFT marketplace connected to the former president's brand.

Meta's Commitment to Virtual Reality Glasses

While Meta may be pulling back from certain metaverse initiatives, CEO Mark Zuckerberg recently announced on Threads, a platform akin to X, that the company is launching a new creative studio within Reality Labs. This studio will concentrate on design, fashion, and technology.

“We’re entering a new era where AI glasses and other devices will change how we connect with technology and each other,” Zuckerberg stated. He emphasized the vast potential of these innovations, noting that the most important aspect is to create experiences that feel natural and people-centered. “With this new studio, we’re focused on making every interaction thoughtful, intuitive, and built to serve people.”

Source: Mark Zuckerberg

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