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Key takeaways
- Meta is reportedly looking to cut spending on the “metaverse”, the tech giant’s collection of augmented reality hardware and software products.
- The company’s entry into the world of transformation was the inspiration for changing its name from Facebook four years ago. However, investors are increasingly wondering whether the huge spending is paying off.
Shares of Meta Platforms (META) rose on Thursday following a report that the company is looking to significantly reduce spending on its “metaverse” projects next year.
Bloomberg Reportedly, CEO Mark Zuckerberg has asked executives to find at least 10% in budget cuts across the company for next year, with cuts of up to 30% in metaverse departments.
Shares rose 4% in recent trading. The stock is up 14% since the beginning of the year, underperforming the benchmark S&P 500 Index.
Why is this important to investors?
Meta and other big tech companies have sought to cut costs in various ways in the past few years as their plans to spend hundreds of billions on artificial intelligence grow. Many companies, including Meta, have cut jobs as a way to save money that they now plan to use to build AI infrastructure.
For years, Zuckerberg has called the metaverse the future of the company, and was the inspiration for the company’s new name when it changed from Facebook in 2021. However, some investors and analysts have called on the company to stop spending billions on the project due to a lack of progress in sales or interest from consumers.
Citing unnamed sources familiar with the talks Bloomberg Reported that executives were asked to cut more spending on Metaverse due to lack of competition from other tech companies. The cuts to the virtual reality segment of Meta’s operations are expected to affect Meta’s operations further, and could include layoffs as early as January, although the report noted that decisions have not yet been finalized.
Meta did not immediately respond to a request for comment on the reported cuts.
Separately, the European Commission said it would assess whether Meta’s new policy that would potentially prevent AI companies from reaching EU users directly through WhatsApp violates competition law by making Meta’s own chatbot, Meta AI, the only available option.
A WhatsApp spokesperson said Investopedia The Commission’s claims are “baseless” and that the policy change was made because the AI companies running their own chatbot services on WhatsApp are straining the platform’s infrastructure. “Even so, the AI field is highly competitive and people can access the services they choose in any number of ways, including app stores, search engines, email services, partnership integrations and operating systems,” the spokesperson said.
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