Cuts”.Meta Stock Up 4% on News of Metaverse Cost Cuts

Meta Platforms shares jumped roughly 4% on Thursday after reports surfaced that Zuckerberg is preparing a major restructuring of the firm’s metaverse investments.

Sources familiar with internal discussions said senior executives are evaluating budget reductions as steep as 30% for the Reality Labs division, the hub of Meta’s virtual‑reality (VR) and augmented‑reality (AR) hardware efforts.

The potential cuts mark a dramatic shift for a company that rebranded from Facebook to Meta in October 2021 to signal a long‑term bet on the “metaverse” as the next frontier of digital interaction.

When the rebrand was announced, Zuckerberg declared, “the metaverse is the next frontier just like social networking was when we got started.”

According to the same sources, the budget trims are part of the 2026 financial plan and are expected to involve workforce reductions, especially within the VR hardware team.

Meta declined to comment on the restructuring rumors.

Reality Labs, which engineers the Quest line of VR headsets and the Ray‑Ban and Oakley AI‑enabled smart glasses, posted a $4.4 billion loss in the most recent quarter. Cumulatively, the unit has accumulated more than $70 billion in losses since the end of 2020.

The scale of the shortfall has raised questions about the sustainability of Meta’s long‑term metaverse vision, especially as competitors such as Apple and Google accelerate their own AR initiatives.

Analysts note that while the metaverse narrative remains compelling, the path to profitability hinges on three core challenges:

• Hardware economics: VR/AR devices still command premium price points and face high manufacturing costs, limiting mass‑market adoption.
• Content ecosystem: Without compelling applications and developer support, hardware alone cannot drive sustained usage.
• Monetization strategy: Meta must translate immersive experiences into recurring revenue, whether through advertising, commerce or subscription models.

Strategic alternatives under consideration include:

• Pivoting Reality Labs toward enterprise solutions, where higher margins and willingness to pay for productivity tools could offset consumer‑grade losses.
• Leveraging Meta’s AI expertise to embed advanced perception and natural‑language capabilities into its existing social platforms, creating cross‑product synergies.
• Exploring strategic partnerships or licensing deals with hardware manufacturers to share development risk and accelerate time‑to‑market.

From a financial perspective, the proposed cuts could improve Meta’s operating leverage in the near term, potentially boosting earnings per share and stabilizing the stock price. However, reducing investment in the metaverse may also signal to the market that the company is de‑emphasizing a long‑term growth engine, which could affect long‑term valuations.