Meta Pursues AI and Metaverse Initiatives Despite 20% Reality Labs Budget Cut

• Meta has decided to reduce almost 20% of Reality Labs’ budget by 2026.
• Bank of America’s analysts predict that the budget reduction could help Meta save about $3 billion.
• Analysts predict that the $3 billion savings could be used for Meta’s AI initiatives.

Meta has reportedly decided to reduce its budget for Reality Labs, the company’s division for metaverse hardware and software development. While the 20% reduction is expected to yield about $3 billion, analysts asserted that the amount could be utilized for Meta’s AI initiatives. 

Reflecting on Meta’s strategic move slated to be implemented by 2026, the analysts of Bank of America asserted that the company would yield savings of about $3 billion from it. While the company’s Q2 earnings call is expected on July 31, there are speculations that the reduction of budget intends to bring revenue progress. In the Q1 call, Meta posted a revenue of $36.45 billion, marking a 27% surge from 2023. With the Q2 call nearing, analysts expect a similar hike in Meta’s revenue.

However, Meta reported $3.8 billion for Reality Labs in the first quarter. Despite the significant losses, Meta CEO Mark Zuckerberg reiterated his optimistic view on the potential of Metaverse. He stated, “We continue making steady progress building the metaverse.”

Meta’s cost reduction plan doesn’t imply the company’s complete halt of its virtual and augmented reality innovations. Instead, the plan aims to bring Reality Labs’ extravagant expenses under control. Reinforcing Meta’s potential innovative moves, reports state that the company is planning to introduce the new Quest headsets and AR glasses in the coming years.

Though the company looks forward to AI initiatives, it faces limitations as Meta tries to confront the increasing scrutiny and regulations over the AI sector. Though the company hasn’t yet clarified its AI projects, analysts hope that the Q2 report will provide a better idea.