$70B dream to AI reality: Meta slices metaverse budget by 30% to boost AI efforts

Meta’s $70 billion metaverse dream is giving way to an AI-centred reality. Reports indicate that the company may cut spending on its virtual-world ambitions by as much as 30% in 2026, following Reality Labs' accumulation of more than $60 billion in operating losses since 2021. 

Released data revealed the latest quarter alone delivered a $4.4 billion loss on revenues of roughly $470 million, underscoring the imbalance between ambition and commercial traction. Investors reacted with relief, pushing the stock up about 4% as hopes of sharper discipline replaced years of frustration with expensive experiments that failed to scale.

The pivot comes at a moment when artificial intelligence has become Meta’s primary strategic engine. Zuckerberg is increasingly positioning the company around compute capacity, custom silicon, and the Llama model suite, rather than avatar meetings in Horizon Worlds. Capital is shifting towards AI infrastructure that promises clearer revenue pathways and an addressable market investors can recognise. Many say the question is no longer whether the metaverse will define Meta’s future, but what remains of it as the company accelerates into the AI race.

What’s driving Meta’s pivot?

Several structural forces pushed Meta towards this recalibration. Reality Labs’ financial performance has become impossible to ignore: annual losses mounted from $10.2 billion in 2021 to $17.7 billion in 2024, with little sign of mainstream adoption to justify that trajectory. 

Horizon Worlds never became the digital town square Zuckerberg imagined, and the Quest headset line, while technologically impressive, struggled to break out of a niche enthusiast segment. It became clear that user behaviour was not bending toward VR at the speed Meta had assumed.

At the same time, artificial intelligence offered a more compelling commercial narrative. Meta expects to allocate $70–$72 billion in 2025 capital expenditure to data centres, AI chips, and model development. The company also poured $14.3 billion into Scale AI for a 49% stake, signalling a desire to anchor itself in the infrastructure layer of the AI ecosystem. The company shared this expansion reflects a shift from speculative platform-building to immediate demand from advertisers, enterprises, and developers seeking AI capability rather than immersive worlds.

Why it matters

According to analysts, the reallocation of resources is reshaping relationships across Meta’s internal and external circles. Investors have urged a more disciplined approach since Meta rebranded in 2021, and the metaverse’s thinning narrative provides cover for leadership to deliver what the market has long wanted: a company aligned with monetisable technology cycles. 

As one analyst told The Information late last year, “AI offers returns you can model; the metaverse was a decade-long leap of faith.” That sentiment is echoing through Wall Street as Meta signals the beginning of a more grounded investment era.

The internal consequences are no less significant, experts added. Metaverse-linked teams face deeper cuts than the rest of the company, and layoffs could begin as early as January if plans are finalised. Developers and hardware specialists must adjust to an ecosystem where the headset is no longer the strategic centrepiece. Instead, AI will define the purpose of products, user engagement, and the economics of Meta’s next decade.

Impact on the tech industry, markets, and consumers

Market watchers noted, the tech landscape is reportedly adjusting to Meta’s shift. Rivals who reframed or quietly stepped away from their own metaverse narratives now appear prescient. Apple’s emphasis on “spatial computing” rather than outright virtual immersion has helped it avoid the backlash Meta is now navigating. With Meta stepping back, Apple gains a clearer runway in high-end mixed reality, while Meta moves aggressively toward becoming one of the world’s biggest AI compute buyers.

For consumers, the shift will be felt in the products they encounter. Quest headsets will continue, but expectations for a unified metaverse platform are fading, according to experts. Meta’s Ray-Ban smart glasses - a surprise success - point to a future where lighter, socially acceptable devices serve as the gateway to AI companions rather than portals to synthetic universes. The company has already framed these glasses as the ideal home for “personal superintelligence,” suggesting they may become the real successor to the smartphone in Meta’s long-term thinking.

It’s reported that developers will also experience a strategic reordering. Those building VR-first experiences will find a smaller, more experimental space, while AI-driven tools, agents, and multimodal interfaces receive greater support. Markets have interpreted the pivot in similar terms: capital flowing into chipmakers, cloud landlords, and AI-aligned firms reflects broad confidence that Meta intends to compete aggressively in this arena.

Expert outlook

Analysts expect Meta to retain a metaverse presence, but as a long-horizon research initiative rather than a defining vision. The company’s hiring of former Apple design lead Alan Dye suggests hardware innovation remains central - only now in service of AI rather than virtual worlds. The goal appears to be seamless, elegant devices that carry Meta’s intelligence models into everyday life.

Still, the pivot presents both opportunities and strategic risks. By shrinking its metaverse ambitions now, Meta relinquishes the scale advantage it once claimed in spatial computing. Should VR or mixed reality rebound faster than expected, the company may find itself outpaced by rivals. Yet, the prevailing view is that AI offers clearer economics and more near-term adoption. The upcoming January earnings call will provide the first concrete indication of how deep the cuts run and how quickly Meta plans to reshape its product pipeline.

Key takeaway

Meta’s decision to trim its metaverse budget by up to 30% marks a profound shift from speculative virtual worlds to capital-intensive artificial intelligence. AI now anchors the company’s roadmap, its spending, and its strategic identity, while VR and AR recede into the realm of experimentation. Investors welcome the clarity, but the full impact will become apparent only once the January earnings call confirms the extent of the pivot. Meta is repositioning itself for the technologies people are adopting today - and the ones it hopes to shape tomorrow.

Meta technical insights

At the start of writing, Meta Platforms (META) is trading around $672.50, extending its rebound after a strong climb from recent lows. The price is now approaching a key resistance zone at $760.00, with an additional barrier at $785.85, where traders typically expect profit-taking or FOMO-driven buying if the rally gains further strength. On the downside, support levels sit at $640.00 and $585.00, and a break below either would likely trigger sell liquidations and deepen the corrective move.

The recent price recovery has carried META toward the upper Bollinger Band, reflecting renewed bullish momentum after weeks of heavy selling. However, the candles show early signs of hesitation as the price approaches resistance, suggesting the market may soon test the conviction of buyers.

The RSI, now climbing toward 70, indicates that momentum is improving steadily but also edging close to overbought territory. This highlights sustained buying interest, while hinting that the upside could become limited unless META clears the resistance decisively.