Meta’s Strategic Pivot: AI and Wearables Take Priority as Metaverse Ambitions Are Scaled Back

In a significant strategic realignment, Meta Platforms is restructuring its future-focused initiatives. The company is scaling back parts of its costly metaverse endeavors and redirecting billions in investment toward artificial intelligence and wearable technology. This shift centers on a radical overhaul of its Reality Labs division, involving studio closures and the elimination of more than 1,000 positions. The move addresses a central challenge: how to better align the company's long-term vision with near-term profitability.

The market has responded favorably to this strategic adjustment. Investors are applauding the increased fiscal discipline in a division that has historically been a significant financial drain. Since 2020, Reality Labs has accumulated operating losses exceeding $70 billion, with a $4.43 billion deficit recorded in the third quarter of 2025 alone.

This course correction sends a crucial signal to institutional investors, many of whom had grown increasingly critical of the massive capital expenditure. While Meta's Q3 2025 revenue grew 26% to $51.2 billion, its planned 2025 investments of $70 to $72 billion were viewed by many as excessive—especially while the metaverse segment generated minimal visible returns.

Deep Cuts Within Reality Labs

The restructuring, announced on Thursday, is sweeping. Approximately 1,000 employees, representing about 10% of the division's workforce, will be laid off. Furthermore, Meta is permanently shuttering three acquired VR game studios: Armature Studio, Twisted Pixel, and Sanzaru Games. Staff reductions are also planned at Camouflaj Studio, known for Batman: Arkham Shadow, and several unannounced projects have been canceled entirely.

A company spokesperson stated that the freed-up resources would be reallocated to "wearables" and AI-driven hardware. Internal success metrics for the partnership with EssilorLuxottica on the Ray-Ban Meta smart glasses were specifically highlighted.

By closing these VR game studios—most acquired between 2020 and 2022—Meta is signaling a hardware future less focused on pure VR gaming and more on practical, AI-integrated devices for everyday use. This aligns with a broader industry trend prioritizing AI infrastructure and productivity applications over experimental consumer technology.

Analyst Sentiment Remains Bullish

This strategic shift coincides with active analyst coverage at the start of 2026. The overall outlook remains decidedly optimistic:

Should investors sell immediately? Or is it worth buying Meta?

• On January 14, Rosenblatt Securities reaffirmed a highly bullish assessment, issuing a price target of $1,117—currently the highest among covering analysts.
• TD Cowen raised its price target to $820 on January 13.
• Wells Fargo slightly reduced its target to $795 at the start of the week but maintained a positive rating.

Current data shows 93 "buy" recommendations out of 95 analysts covering the stock. The median price target stands around $806, implying a potential upside of nearly 30% from current levels.

The market values Meta at a price-to-earnings ratio of approximately 24.5—moderate compared to its own history, provided the new AI investments lead to a tangible improvement in monetization within its core advertising business.

Technical Chart Context and Valuation

Following a recent correction, the share price has stabilized. The stock currently trades at $615.52, roughly 13% below its 52-week high but significantly above its 52-week low. It remains above its 50-, 100-, and 200-day moving averages, with a Relative Strength Index (RSI) of 47.1 indicating neutral momentum.

Technically, the $600 area is seen as key support. On the upside, market participants view the zone around $625 as near-term resistance. A convincing breakout above this level—potentially driven by strong quarterly results—could reopen a path toward $700. Conversely, a failure to see corresponding revenue from increased AI spending could refocus attention on the recent lows near $480.

The Crucial Earnings Report Ahead

The quarterly results scheduled for January 28, 2026, will be a critical test of Meta's ability to balance future investments with profitability. The market anticipates Q4 2025 revenue between $56 and $59 billion.

Three key areas will be under intense scrutiny:

1. 2026 Capital Expenditure Guidance: The critical question is whether savings from Reality Labs will flow to the bottom line or be almost entirely reinvested in AI infrastructure and computing power.
2. Advertising Revenue Trends: The market requires evidence that AI tools are further enhancing ad efficiency and that heavy investments in the core business are paying off.
3. Wearables Segment Momentum: Any specifics on production and sales targets for the Ray-Ban smart glasses—internally, annual goals are reportedly in the tens of millions—will offer clues about this division's future role in the corporate portfolio.

Consequently, the late-January earnings release carries dual significance. It will not only provide an update on current business performance but also serve as the first major test of whether Meta's strategic pivot from the metaverse to AI and wearables can sustain investor confidence.