Meta Slashes Metaverse Budget by 20% Ahead Q2 Earnings Call

Meta Inc., the parent company of WhatsApp, Facebook, and Instagram is implementing a 20% budget slash for Reality Labs. This is the arm of the company that handles its metaverse software and hardware. The 20% budget cut is gradual and will span between now and 2026.

According to a report, the slash is to enable Meta to focus on other ventures that it is eyeing to leverage such as Artificial Intelligence. Meanwhile, there are indications that Reality Labs will be more production-oriented going forward.

Meta Inc’s Metaverse Facing Strategic Finance Shifts

The budgetary slash is estimated to save Meta about $3 billion, according to analysts for the Bank of America. Industry watchers say they are not shocked by the decision from Meta given the performance of Reality Labs over the years.

For instance, in 2023, Reality Labs posted a loss of $3.7 billion in Q2 which was a wider-than-expected loss according to analysts. Although, at the time, Meta’s boss, Mark Zuckerberg had assured of continued commitment to the metaverse vision despite making investments in AI.

With the recent development, analysts say Meta seems to be reconsidering its unconditional support to the metaverse development. What is uncertain is the long term plans for Reality Labs. According to industry data, Realty Labs’ total loss amounts to a staggering $55 billion since 2019.

Anticipated Earnings and Future Directions

With Meta’s next earning call due by July 31, there are predictions that the company will record similar figures to its first quarter revenue. That is, within the $36.45 billion range in revenue which was about 27% improvement over 2023 figures.

Zuckerberg in April, during the first quarter earning call, had informed investors that there were going to be adjustments with Reality Labs. Notably, he had hinted that the division will pivot in the direction of serving Meta’s Artificial Intelligence efforts.

Reality Labs’ Market Viability and Product Innovation

Meanwhile, the relevance of Reality Labs will depend on the viability of the mainstream consumer market. If the demand for the next generation of Virtual Reality and Augmented Reality scales it will help.

This is as the company has plans to launch the next generation Quest VR headset and Ray-Ban smart glasses with a visual component as well as a wrist-worn “neural interface” in the next couple of years.