Meta Platforms (META) shares surged as much as 6% in early trading Wednesday and closed up 4%, adding nearly $70 billion to the company’s market value in a single session. The catalyst? A Bloomberg report that Mark Zuckerberg is preparing to slash spending on the metaverse by as much as 30% next year.
For most investors, that news felt like a long-overdue Christmas gift.
The $70 Billion Money Pit Is Getting Smaller
Since Meta rebranded in late 2021 to chase the “next frontier” of virtual and augmented reality, its Reality Labs – the division behind Quest headsets and the ghost-town-like Horizon Worlds – has bled more than $70 billion with virtually no meaningful revenue to show for it. In the most recent quarter alone, it posted a $4.4 billion operating loss.
Wall Street never bought the metaverse religion. While Zuckerberg talked about building the successor to the mobile internet, investors saw a bottomless capital sink with no clear path to profitability. The stock paid the price for years.
Today’s rally shows what happens when reality finally catches up with rhetoric.
“Please Stop Burning Cash” – Message Received
According to people familiar with the matter, Meta executives are debating 2026 budget cuts of up to 30% for the metaverse unit, with the deepest reductions aimed at virtual-reality hardware and Horizon Worlds. Some layoffs could begin as early as January. While the company routinely asks for 10% cuts across the board, the metaverse group is being asked to give far more.
Translation from Wall Street speak: “We’re done subsidizing your science project.”
Analysts quickly ran the numbers. Mizuho’s James Lee estimates a 30% cut could save roughly $5–6 billion annually and add about $2 to 2026 earnings per share. That’s Lloyd Walmsley kept his $815 price target and “Outperform” rating, writing that the move “removes a major overhang” and lets Meta redirect billions toward the one thing investors actually love right now: artificial intelligence.
The Real Winner: AI Over Avatars
Meta’s pivot couldn’t be clearer. The company just dropped $14.3 billion to take a 49% stake in Scale AI, launched a new “Superintelligence Lab,” and has been aggressively open-sourcing models like Llama. During last quarter’s earnings call, the word “metaverse” wasn’t uttered once. “AI” was mentioned 86 times.
Investors are voting with their wallets: they’ll happily fund AI ambitions, but they’re tired of paying for empty virtual concert venues attended by legless avatars.
Bottom Line
Today’s 4% pop wasn’t about excitement over Meta’s future in the metaverse – it was relief that the company is finally spending less on it.
After years of pleading, scolding, and outright frustration, shareholders got the capital discipline they’ve been begging for. And the stock market rewarded Meta instantly.
Sometimes the best growth strategy is simply to stop losing money.