Meta Tightens Funding for Metaverse Division

Reality Labs Told to Cut 20% of Expenses
According to a July 18th report by The Information, as Meta's spending on artificial intelligence escalates, company executives have imposed stricter constraints on the Reality Labs division. The hardware team within Reality Labs has been mandated to reduce expenses by nearly 20% over the next two years, with the bulk of these cuts taking effect this year. Meta's Chief Financial Officer informed employees that, given the colossal investments already made, Meta should position AR/VR as a trillion-dollar opportunity.
Meta's massive investments in this division have yet to yield anticipated returns. Since 2019, Meta's cumulative losses in Reality Labs have surpassed 55 billion, with annual losses soaring from 4.5 billion in 2019 to $16.1 billion in 2023. Furthermore, the division has undergone several rounds of layoffs and restructuring over the past year, primarily targeting mid-to-senior-level managers.

Meta Pivots Focus to AI
The report also notes that Meta has shifted some AI-related staff from Reality Labs to other departments. This month, the company transferred a significant portion of Reality Labs' 140-person AI speech team to its generative AI group, signaling a strategic shift in Meta's AI priorities.
The cost-cutting measures in Reality Labs coincide with a sluggish VR market. According to estimates by IDC, shipments of AR/VR headsets declined by 23.5% last year and a further 67.4% in the first quarter of this year. Additionally, Meta's planned AR glasses (Hypernova) for next year, weighing over 70 grams with a thick frame, may deter consumers, as suggested by both current and former employees.
Despite the weakness in the VR device market, interest in AI devices is growing. Meta is increasingly focusing on AI technology. In spring, the company added a Meta AI assistant to its latest Ray-Ban smart glasses, enabling object recognition and assisting users with tasks like translation.
In April, Meta announced the launch of its third-generation large language model (LLM), Llama 3, describing it as "the most capable open-source LLM to date." Based on Llama 3, Meta upgraded its AI assistant, claiming it to be "the smartest AI assistant you can use for free." Meta disclosed that Llama 3 will be available on cloud platforms such as Amazon, Microsoft, and Google Cloud, with support from chip giants like NVIDIA and hardware from Dell.