Meta to cut up to 30 percent of metaverse budget

Meta is expected to make budget cuts of up to 30 percent for its metaverse initiative, Bloomberg News reported, citing people familiar with the discussions.

The Facebook parent's shares rose four percent as the move eased some investor jitters over a bet that CEO Mark Zuckerberg has backed with billions of dollars, only for the business to burn more than US$60 billion ($90.7 billion) since 2020.

The company even changed its name to Meta from Facebook in 2021 to signal its priorities.

The proposed metaverse cuts are part of the company's annual budget planning for 2026, which included a series of meetings at Zuckerberg's compound in Hawaii last month, Bloomberg reported.

Cuts that high would most likely include layoffs as early as January, according to the report.

Meta did not immediately respond to a Reuters request for comment.

"Smart move, just late," said Huber Research Partners analyst Craig Huber. "

This seems a major shift to align costs with a revenue outlook that surely is not as prosperous as management thought years ago."

The metaverse group sits within Reality Labs, which produces the company's Quest mixed-reality headsets, smart glasses made with EssilorLuxottica's Ray-Ban and upcoming augmented-reality glasses.

Meta has struggled to sell its vision of an immersive metaverse of interconnected virtual worlds and expand the market for its devices beyond the niche of the gaming community.

However, it has achieved an early lead with its smart glasses, as competitors such as Alphabet's Google, Apple and Snap failed to capitalize on the market potential with their initial attempts.

The report comes as Meta scrambles to stay relevant in Silicon Valley's artificial-intelligence race after its Llama 4 model met with a poor reception.

To fuel its ambitious goals, Meta has committed as much as US$72 billion in capital spending this year.

Overall, large tech companies are expected to spend around US$400 billion on AI this year.

The company reorganised its AI efforts under Superintelligence Labs earlier this year, with Zuckerberg personally leading an aggressive talent acquisition, floating offers for startups and directly courting prospects on WhatsApp with million-dollar pay packages.