Meta is scaling back some of its most ambitious metaverse projects, reportedly cutting up to 30% of Reality Labs’ funding, reports Bloomberg. Since 2020, the social media giant has invested tens of billions in VR headsets, AR devices, and experimental virtual worlds, yet Reality Labs continues to post massive losses while contributing only a small fraction of Meta’s revenue.
The news helped Meta’s stock post a rare rally in what has otherwise been a rather tepid year compared to other tech stocks.
Notably, in Q1 2025, the Reality Labs division posted an operating loss of $4.2 billion, while its revenue declined 6% year-over-year to $412 million. And now, with AI emerging as a core growth engine, the company is shifting resources toward more focused, high-impact projects.
The company’s metaverse vision has always been a multi-year, speculative bet, aiming to create fully immersive digital spaces where users can work, play, and socialise. But despite the futuristic appeal, adoption of Meta’s VR and AR devices has been slower than expected, and the cost of hardware and content development remains high. Therefore, the questions arise whether the hefty expenditures are justified given the lack of near-term profitability.
This is not a sudden shift in Meta’s approach to its metaverse vision. Reality Labs has long operated at a loss, accumulating over $20 billion in operating deficits in recent years. In response to these ongoing challenges, the company undertook a major restructuring in April 2025, laying off a significant number of employees, particularly within Oculus Studios and the Supernatural teams. The move was aimed at streamlining operations, reducing costs, and refocusing the division on projects with clearer paths to impact and profitability.
Meanwhile, the 30% budget reduction is expected to affect both ongoing and planned metaverse initiatives. Some projects may be delayed, while Reality Labs could undergo further internal restructuring to streamline operations and cut overhead. Development of VR and AR hardware may slow, though Meta is expected to continue supporting high-priority initiatives like Quest headsets and AR glasses. Overall, the company appears to be moving away from a ‘build everything at once’ approach, adopting a more calculated and selective strategy that balances long-term vision with fiscal discipline.
This also comes at a time when the Mark Zuckerberg-led firm is facing heavy financial burdens due to its massive commitments to the artificial intelligence sector. Last month, the firm unveiled plans to invest an eye-popping $600 billion in building AI infrastructure across the US, amid its aggressive efforts to develop what it calls ‘personal superintelligence‘.
The Tech Portal is published by Blue Box Media Private Limited. Our investors have no influence over our reporting. Read our full Ownership and Funding Disclosure →
