Meta, even changed its name... considering metaverse budget cuts of up to 30% [Stocks+]

Strategic shift from the metaverse to AI glasses and wearables

$70 billion cumulative deficit…increasing pressure from investors and regulators

Predictions that "Meta will focus on AI instead of the metaverse" continue

Meta is reportedly undertaking a major scale-down of the metaverse business it has long touted as a future growth engine. CEO Mark Zuckerberg has instructed a review of plans to cut next year's metaverse organization budget by up to 30%, prompting analysis that the strategic center is effectively shifting "from the metaverse to AI."

Bloomberg reported on the 4th (local time) that "Meta executives are discussing budget cuts for the virtual world platform 'Horizon Worlds' and the Metaverse Group, which includes the Quest VR device business," adding that "if the cuts are large, layoffs could begin as early as January next year."

Money saved from metaverse budget cuts is expected to be concentrated within Meta's long-term R&D organization 'Reality Labs' for the development of next-generation devices such as AI glasses and wearables. This aligns with Zuckerberg's recent tendency to rarely mention the metaverse and instead focus on generative AI, chatbots, AI glasses and other 'reality-based AI devices.'

Meta discusses next year's budget every year at the year-end meeting in Hawaii, and at this year's meeting Zuckerberg reportedly requested a 10% cost reduction across all divisions. However, he is said to have ordered deeper cuts for the metaverse division, saying "the metaverse has not seen the level of competition and ecosystem expansion we expected."

The metaverse business has recorded cumulative losses totaling $70 billion since 2021. Investors have continued to criticize it as a "money-losing operation." Concerns over child and teen safety have also raised pressure from regulators.

Upon news of the cuts, Meta's stock jumped 5.7% intraday, somewhat easing investor concerns.

Market experts say Zuckerberg is likely to fully pivot from the metaverse to an AI-centered strategy. Mike Proulx, Vice President at Forrester, predicted, "Meta could shut down core metaverse projects such as Horizon Worlds within this year," and added, "it is highly likely they will shift direction to AI models like 'Llama', Meta AI, and AI glasses."

At the same time, Meta has been accelerating AI-based hardware development, including recently recruiting a top executive from Apple's design organization.

New York=Park Shin-young, correspondent nyusos@hankyung.com