Zuckerberg Eyes Metaverse Cuts: Why META Is Rightfully Rallying

Key Points

• Shares of Meta Platforms got a boost in early December, helping stem the stock's precipitous fall.
• The company may make drastic cuts to its metaverse initiative, which has lost billions over the years.
• This potential shift would have many positive implications for Meta, especially as markets worry about soaring expenses.

Since reporting its Q3 2025 earnings in late October, Magnificent Seven stock Meta Platforms NASDAQ: META has been in a rut. Shares fell by more than 11% on Oct. 30 in reaction to those results, closing near $666. The stock continued to trade down for multiple weeks, closing as low as $589. Fears surrounding Meta’s artificial intelligence (AI) spending have driven the stock’s decline. As of the Dec. 9 close, shares are trading at around $657, nearly recovering to their post-earnings level.

One development aiding the stock’s rebound directly addresses investor fears: potential budget cuts. As first reported by Bloomberg, CEO Mark Zuckerberg is considering cutting the company’s metaverse spending by up to 30%. This news sent Meta shares up by 3.4% on Dec. 4. Below, we’ll break down what metaverse spending cuts would actually mean and why this is a clear positive development for Meta Platforms going forward. 

Metaverse Cuts: Headsets Out, Glasses In

The metaverse sits within Meta’s broader Reality Labs segment. In Reality Labs, the company makes virtual reality (VR) headsets and AI smart glasses. The company’s push into hardware came in 2021 to 2022 when it changed its name from Facebook to Meta Platforms.

Mark Zuckerberg envisioned a future economy built around its headsets, which allowed people to enter its immersive metaverse environment. He believed that as VR headsets gained popularity, the metaverse could support “hundreds of billions of dollars in digital commerce.” Many consider this initiative the biggest failure in Meta’s history. Combined with the 2022 bear market, it led shares to fall as low as $88 in November of that year.

The tech company pivoted significantly after 2022, focusing more on AI to drive improvement in its core social media advertising business. It also began emphasizing AI smart glasses, which it now sees as the computing device of the future.

Reports of potential metaverse cuts signal a continuation of this trend. They specifically refer to the company reducing spending on VR headsets, but not AI glasses. Now, let’s dive into the numerous reasons why this would be a good decision for Meta.

Shifting Investment to Higher-Potential Opportunities: A Positive for Meta

Needle-moving demand for VR headsets, and by extension metaverse engagement, has clearly not materialized. Over the last 12 months, Meta has generated $2.34 billion in revenue from Reality Labs. That’s barely higher than the $2.27 billion it generated in 2021. Over that period, Reality Labs' cumulative operating loss was around $70 billion.

VR headsets are not a new product. Meta acquired Oculus back in 2014 and began selling VR headsets in 2016. Despite selling headsets for nearly a decade, Reality Labs continues to have an almost negligible impact on Meta’s total revenue. The company’s Q4 guidance implies that it will generate nearly $200 billion in overall sales this year. Considering this, it makes sense for Meta to reduce spending in this space.

Placing less emphasis on headsets would also allow the company to focus on hardware with more potential: AI glasses. People can wear AI glasses in public, using them to solve daily tasks. Meanwhile, the use case for headsets is more niche, often confined to people playing VR video games at home. This difference allows AI glasses to target a larger audience, creating higher sales potential. If Meta hopes to make Reality Labs profitable one day, sales volumes will need to soar to overcome the massive costs of building these devices.

Furthermore, cutting spending in underperforming areas could help shift investor sentiment. This comes as worries around out-of-control spending are the main overhang on shares. Meta could reallocate metaverse spending toward AI initiatives that are clearly driving improvements in its core advertising business. It could also simply use metaverse cuts to limit overall expense growth. This would benefit the company’s free cash flow, which is likely to fall significantly in 2026.

Analysts Upgrade and Reiterate META Ratings

After Bloomberg’s report, MarketBeat tracked multiple analysts who updated their outlooks on Meta.

Arete Research upgraded Meta from Neutral to Buy. 

Their $718 target remains one of the lowest on the stock, implying around 9% upside. Rosenblatt Securities reiterated its Buy rating.

The firm’s $1,117 target is one of the most bullish on Meta, implying 70% upside.

Overall, cutting metaverse spending would be a step in the right direction for Meta Platforms.

It will be interesting to see if this actually happens and whether it affects the company’s all-important 2026 expense outlook.