Meta stock shot up 5.7% in early New York trading on Thursday after internal discussions revealed that Mark Zuckerberg is preparing to massively reduce funding for the company’s metaverse projects.
The decision came as part of 2026 budget talks held last month at Mark’s Hawaii estate, where he asked executives to implement company-wide cost reductions. But this time, the metaverse team got singled out for deeper cuts, with proposals of up to 30%.
This drastic reduction will hit both Horizon Worlds and the Quest VR unit, which together make up the core of Meta’s virtual world ambitions.
These platforms were supposed to represent the future of human interaction and commerce when Mark changed Facebook’s name to Meta in 2021, but they’ve failed to gain any meaningful traction.
The cuts, which could include layoffs starting in January, are part of a broader effort to stop pouring money into ideas that aren’t delivering.
Meta pushes AI hardware as it drains money from metaverse division
The company plans to redirect the savings toward hardware projects more closely tied to AI, especially products like smart Ray-Ban glasses and wearables under development in the Reality Labs division.
That same unit has already lost more than $70 billion since 2021. The metaverse team, which falls under Reality Labs, has now been ordered to take a sharper budget cut than the rest of the company.
Executives involved in the discussions allegedly said that Mark’s usual request for a 10% budget cut across all teams still stands, but Reality Labs got a heavier blow due to the metaverse’s continued failure to attract widespread developer or consumer interest.
“They haven’t seen the level of industry-wide competition over the technology that they once expected,” one of them said.
Even as Mark continues to believe that people will eventually work and socialize in virtual worlds, that belief no longer reflects in his priorities. He’s stopped talking about the metaverse during earnings calls and public statements.
Instead, he’s talking about AI models, chatbots, and AI-driven tools like Meta AI and Llama, which require new kinds of hardware, not virtual worlds.
Mike Proulx, vice president at Forrester, said in April that Meta would likely “shutter its metaverse projects, like Horizon Worlds” before year-end. He added, “Reality Labs continues to be a leaky bucket.
Shuttering metaverse efforts would allow the company to give more focus to its AI projects including Llama, Meta AI, and AI glasses.”
The stock spike on Thursday was the company’s biggest intraday jump since July 31, as traders responded to what many of them see as long-overdue budget discipline. Investors have consistently flagged the metaverse as a wasteful bet.
The decision to slash funding, especially with revenue still weak from Horizon Worlds and Quest, signals that even Mark’s internal team is stepping back.
EU opens antitrust probe over WhatsApp’s AI policy restrictions
While Meta tries to realign itself with AI development, regulators in Brussels are already stepping in.
On Thursday morning, the European Commission confirmed it had opened an antitrust investigation into whether Meta’s new WhatsApp AI access policy violates competition laws inside the European Economic Area (EEA).
The policy, introduced in October, blocks companies from using a business tool within WhatsApp if AI is the primary service they offer.
That restriction raised concerns in Brussels that Meta could be abusing its power by preventing third-party AI providers from reaching customers across Europe.
The Commission said that while businesses can still use AI tools for things like customer service, it’s worried that Meta’s rule may “prevent third party AI providers from offering their services through WhatsApp in the European Economic Area.”
