For years, Mark Zuckerberg has been the world’s most enthusiastic architect of a digital utopia, famously renaming his entire company from Facebook to Meta to signal his commitment to a virtual future. But in Silicon Valley, cash flows where the excitement goes, and right now, the excitement—and the money—is leaving the virtual reality headset and heading straight for artificial intelligence.
In a move that signals a massive strategic pivot, Meta is reportedly planning to slash the budget for its metaverse division, Reality Labs, by as much as 30 percent for the 2026 fiscal year. The decision, which sent Meta’s stock climbing more than 3 percent on Thursday, marks a stark moment of reckoning for a vision that has cost the company more than $70 billion since 2021.
The message from Menlo Park is clear: The “Ready Player One” future can wait. The AI future is happening right now.
A $70 Billion Reality Check
To understand the magnitude of this shift, you have to look at the receipt. Meta’s Reality Labs has been burning cash at a rate that would make even the most spendthrift startup blush. The division, responsible for the Quest VR headsets and the Horizon Worlds social platform, has been operating at deep losses while consumer adoption has remained lukewarm at best.
While the metaverse was pitched as the successor to the mobile internet—a place where we would work, play, and socialize as avatars—most users have preferred to stay in the physical world, scrolling through Instagram Reels on their very real smartphones.
According to people familiar with the matter, the proposed cuts could lead to layoffs as early as January. The restructuring is aimed specifically at the teams building VR hardware and software, effectively tapping the brakes on a project that was once Zuckerberg’s singular obsession.
The New Golden Child: AI Wearables
But Meta isn’t just cutting costs to save pennies; it’s reallocating them to buy a ticket on the AI rocket ship.
A Meta spokesperson confirmed the shift, noting that the company is moving investment dollars away from pure metaverse plays and toward “AI glasses and wearables.” This aligns with the surprising success of Meta’s Ray-Ban smart glasses—a product that looks like normal eyewear but packs an AI assistant capable of seeing and hearing the world around you.
Unlike bulky VR headsets that cut you off from your surroundings, AI wearables enhance the real world. They represent a more subtle, immediate utility that consumers actually seem to want. It turns out, people may not want to live inside a computer, but they are perfectly happy to wear a computer on their face if it helps them identify a landmark or translate a menu.
Wall Street Breathes a Sigh of Relief
Investors have long treated Zuckerberg’s metaverse spending with a mix of skepticism and anxiety. For years, they have essentially tolerated the metaverse expenditures as the cost of doing business with a visionary founder.
Thursday’s market reaction was a collective exhale. By pivoting resources to AI—a sector where Meta has regained its footing with its powerful Llama models—the company is showing it can be disciplined. It is acknowledging that while the metaverse might still be the long-term future, AI is the engine that will drive growth (and revenue) in the next decade.
The metaverse isn’t dead, but it has been demoted. Zuckerberg hasn’t abandoned his dream of a 3D internet, but he is no longer willing to fund it with a blank check. As the tech giant tightens its belt on virtual worlds to double down on artificial intelligence, the company is betting that the killer app of the future isn’t a virtual room you visit—it’s a smart voice that whispers in your ear.
