Meta's stock pop could be just the start as Zuckerberg takes aim at 'black hole' of spending

By Christine Ji

Reports that Meta plans to slash its metaverse budget by as much as 30% have eased investor concerns around AI spending and ignited a stock rally

Mark Zuckerberg attends the WSJ Innovator Awards in October. The metaverse sits within Meta's Reality Labs, which reported a $4.4 billion net loss last quarter.

Meta Platforms could be set to scale back its artificial-intelligence ambitions, much to the relief of anxious investors.

According to a Bloomberg report, Meta (META) CEO Mark Zuckerberg is aiming to cut budgets for the company's virtual-reality metaverse initiative by up to 30% amid a companywide spending pullback.

Shares of Meta jumped 3.4% on Thursday, as investors celebrated what appeared to be increased artificial-intelligence spending discipline.

It could be the start of a comeback for Meta, with Mizuho analyst Jack Yuan writing in a Thursday note that "we see a significant rally ahead for Meta shares, and recommend investors add to positions."

If accurate, the budget cuts would signal a marked departure from Zuckerberg's previous messaging, as he called for an acceleration of AI capital expenditures going into 2026 on the Oct. 29 earnings call. As a result, Meta's stock has paid the price in the last month, shedding as much as 22% from its pre-earnings-report level. The stock is still trading 11% below its Oct. 29 close.

Meta did not immediately respond to a request for comment.

Also read: Meta's stock is now this analyst's 'best idea.' Why all the AI spending could be worth it.

The metaverse group is a division within Meta's Reality Labs business that works on products such as the Quest virtual-reality headsets and "Horizon Worlds" gaming software. In the third quarter of 2025, Reality Labs generated $470 million in revenue and posted a net loss of $4.4 billion, and Yuan characterized it as "an area perceived as a black hole" to investors.

Cutting spending on a highly unprofitable business segment could free up resources for Meta to focus on improving its AI models and to continue driving growth in its advertising business. The cuts could add around $2 of earnings per share to Mizuho's current 2026 EPS estimate of $29.50.

"We think this move, particularly if validated by the company, stands to significantly increase investor confidence in capital allocation at Meta," Yuan wrote.

In 2022, Meta's stock received a similar punishment from Wall Street, losing over two-thirds of its value from a 2021 high due to concerns about overspending on the metaverse. The shares didn't recover until Zuckerberg finally capitulated and dubbed 2023 the "Year of Efficiency," defined by layoffs and aggressive spending cuts.

Read on: Meta's stock is the new 'Magnificent Seven' doormat. Should you buy the dip?

-Christine Ji

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12-04-25 1910ET