Meta’s Strategic Pivot: Capital Reallocated from Metaverse to AI

A significant strategic realignment is underway at Meta Platforms Inc. The social media giant is decisively shifting its future investment priorities, moving capital away from its costly Metaverse ambitions and toward a more aggressive pursuit of artificial intelligence. Market analysts view this as a clear signal of heightened financial discipline and a more focused approach to capital allocation.

The strategic shift has been met with approval on Wall Street. On December 14, Piper Sandler reaffirmed its "Overweight" rating on Meta's stock, naming it a "Top Large-Cap Pick." The firm set a price target of $840, citing momentum in the advertising business and valuation metrics it considers attractive.

A scenario outlined by 24/7 Wall St. suggests that consistent cost discipline in the Metaverse division coupled with successful monetization of AI could drive the share price into a range of $900 to $1,000 by 2026. This projection is based on several key factors:
- Continued expansion of the ad business through AI optimization.
- The financial leverage provided by reduced losses at Reality Labs.
- Additional revenue potential from new AI-powered products.

From a chart perspective, the broader picture remains constructive. Priced in euros, the shares trade approximately 22% below their 52-week high but remain well above the low and just below the 50-day moving average, indicating a period of consolidation following a previous rally.

Scaling Back the Metaverse Ambition

Recent reports confirm a substantial budget reduction for Meta's "Reality Labs" division, which oversees Metaverse projects like "Horizon Worlds" and related hardware. The unit's budget for the 2026 fiscal year is slated to be cut by up to 30%.

This move marks a noticeable strategic correction by CEO Mark Zuckerberg. Since 2021, Reality Labs has accumulated losses exceeding $70 billion, with a deficit of $13.2 billion against mere revenue of $1.3 billion in 2025 alone. The planned cuts are expected to affect both software and hardware initiatives and will likely be accompanied by job reductions starting in January 2026.

The company's central focus is no longer the expensive Metaverse experiment, but rather the challenge of translating its AI initiatives into profitable growth more rapidly.

Redirecting Resources Toward Artificial Intelligence

In parallel with the Metaverse cuts, Meta is actively channeling resources into AI. The company reported the acquisition of AI wearable startup Limitless on December 14, aiming to better integrate AI functionalities into consumer devices and everyday applications.

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Internally, Meta is developing its own AI model, codenamed "Avocado," and establishing "Superintelligence Labs" to compete directly with heavyweights like OpenAI and Google. The capital being reallocated from Reality Labs provides these projects with increased financial flexibility.

The growing importance of AI is already reflected in Meta's financials:
- AI-powered advertising tools now generate approximately $60 billion in annual ad revenue.
- Daily Active Users (DAUs) reached 3.54 billion in Q3 2025, an 8% year-over-year increase.

This gives Meta a massive existing user base to rapidly scale and monetize new AI features.

Dividend and Key Market Appointment

Trading ex-dividend as of this Monday, Meta's stock will reflect the adjustment for a quarterly cash dividend of $0.525 per share ($2.10 annualized), payable on December 23. As is typical, this adjustment is likely to result in a slight technical decline in the share price at the market open.

Operationally, Meta is also strengthening its position in crucial growth markets. At the start of 2026, Aman Jain, a veteran of Amazon and Google, will assume the role of Head of Public Policy for India. This move addresses the complex regulatory environment in Meta's largest market by user count, where political and regulatory decisions directly impact growth and product offerings.

Outlook: Fourth-Quarter Earnings as the Crucial Test

The implementation of this strategic pivot will be closely watched in the coming weeks. While drastically reducing Metaverse expenditures will slow cash burn, it simultaneously increases pressure to deliver measurable returns from AI investments. These returns are expected to materialize through more efficient advertising, new products, or additional services for Meta's billions of users.

The next major milestone will be the Q4 earnings report, scheduled for January 28, 2026. This release will reveal whether the combination of cost discipline, a resilient ad business, and an accelerated AI push can support or even exceed current analyst expectations for earnings per share of approximately $8.17.