Meta is quietly winding down its Metaverse ambitions, with Bloomberg reporting cuts of up to 30% to the division’s budget in 2026, signaling layoffs and a pivot toward AI as the company’s new obsession.
When Mark Zuckerberg rebranded Facebook as Meta in 2021, it was more than a name change, it was a declaration of intent. The company poured tens of billions of dollars into Reality Labs, its metaverse division, betting that virtual worlds would become the next frontier of human interaction. Bloomberg now reports that the unit has burned through more than $60–70 billion since 2020, a staggering sum that underscores just how much faith Meta placed in the concept.
But that faith is fading. According to Bloomberg, Meta executives are preparing to slash the metaverse budget by nearly 30% in 2026, with layoffs expected as early as January. Horizon Worlds, Quest headsets, and other VR projects will be among the casualties. Investors, long skeptical of the metaverse’s viability, have welcomed the news, Meta’s shares jumped after reports of the cuts.
The pivot is not just financial; it’s cultural. Meta recently hired Alan Dye, Apple’s former VP of interface design, to lead a new Creative Studio. Initially, this move was seen as a way to revamp the metaverse’s clunky UI and UX. Instead, Bloomberg notes Dye will now focus on making AI interfaces more user-friendly, reflecting Meta’s shift toward chasing what Zuckerberg has called the “AI dragon”.
Meta’s AI ambitions are already massive. Earlier this year, the company launched a Superintelligence Lab and invested $14.3 billion into Scale AI, securing a 49% stake in the startup. The company is betting that large language models, generative AI, and consumer hardware like its Ray-Ban smart glasses will define the next era of computing. In other words, the metaverse is being shelved in favor of AI superintelligence.
This isn’t just Meta’s story, it’s emblematic of a broader industry trend. Microsoft, once bullish on augmented reality with its HoloLens project, has also scaled back AR ambitions to focus on AI. The company dissolved much of its mixed reality team in 2023 and has since doubled down on AI integrations across Office, Azure, and Windows. Both tech giants are effectively conceding that immersive virtual worlds are not ready for prime time, while AI offers immediate returns in productivity, consumer engagement, and investor enthusiasm.
The irony is hard to miss. Meta’s rebrand was supposed to cement its identity as the metaverse company, with “unlimited funding” and a willingness to endure years of losses to build the future. Instead, Reality Labs has become a “leaky bucket,” losing more than $70 billion since 2021. Now, the company is quietly retreating from its grand vision, leaving behind a cautionary tale of hype, overinvestment, and the brutal realities of consumer adoption.
As Bloomberg put it, “The metaverse group was asked to cut deeper this year given that Meta has not seen the level of industry-wide competition over the technology that it once expected”. Translation: the metaverse dream is decades away, if it ever arrives. AI, meanwhile, is here now, and Meta, like Microsoft, is chasing it with everything it has.
