Meta’s Strategic Pivot: From Metaverse Dreams to AI and Efficiency

A significant strategic realignment is underway at Meta Platforms, Inc. The social media giant is shifting its focus away from its costly metaverse ambitions and toward artificial intelligence and its more profitable core advertising business. This move, which includes substantial cost-cutting in its virtual reality division, has been met with approval from market analysts, even as new questions emerge regarding data privacy, AI strategy, and platform content moderation. The central question for investors is whether this represents a foundational shift for the company's next growth phase or merely a short-term effort to bolster its financial metrics.

The market's reaction to reports of Meta's strategic shift has been notably positive. Analysts at Rosenblatt Securities have issued a "Buy" rating for the stock alongside a price target of $1,117—a figure that implies substantial upside from current trading levels. The broader consensus target among analysts rests around $832, which also sits well above the present share price. This optimism is largely rooted in anticipated improvements to profitability. By reducing the heavy expenditures associated with its Reality Labs unit, Meta is expected to see a direct boost to its operating margins.

Following the news, Meta's shares recovered from their daily lows, stabilizing near the $649.70 mark. For many investors, this underscores a current market preference for capital discipline and core business focus over expansive, long-term visionary projects.

A Sharp Pullback in Metaverse Spending

According to reports from Bloomberg, Meta plans to cut the budget for its "Reality Labs" division by approximately 30%. This unit, responsible for the company's metaverse initiatives, has long been viewed as a major capital drain with no clear path to profitability in the near term. The decision is widely interpreted as a clear signal from CEO Mark Zuckerberg: capital is being reallocated from speculative virtual reality ventures into areas with a faster route to revenue generation, such as AI development and smart glasses.

Effectively, this shift redirects billions of dollars originally earmarked for VR hardware investment back into the core advertising platform and the underlying AI infrastructure that supports it.

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

AI Ambitions and Regulatory Hurdles

As it reins in spending in one area, Meta continues to advance its AI agenda, albeit with some notable strategic changes. Reports indicate the company is utilizing Alibaba's Chinese "Qwen" model to train an internal AI project codenamed "Avocado." This represents a noticeable departure from Meta's previous stance as a champion of open-source AI development, raising fresh questions about technological dependencies and control.

Concurrently, legal and reputational challenges persist. Meta has recently agreed to set aside $190 million to settle a shareholder lawsuit related to data privacy violations, with final court approval expected in 2026. Furthermore, The Guardian has reported on allegations of increased censorship of reproductive health content across Meta's platforms. These issues create headwinds in the public and regulatory spheres, even as the company's financials may initially benefit from cost-cutting measures.

Technical Perspective and Investor Outlook

From a chart analysis standpoint, Meta's stock is navigating a critical price range. A so-called "death cross" recently appeared on its chart—a typically bearish technical signal where a short-term moving average crosses below a long-term one. However, a subsequent rebound of about 1.7% from the $638 area demonstrated that buyer interest remains at these levels. Technical analysts suggest that if the share price can maintain a foothold above $650, a path toward a resistance zone around $800 could open up.

For shareholders, the success of this strategic pivot will be measured by a clear benchmark: upcoming quarterly results must demonstrate whether the reduced metaverse spending genuinely translates into significantly improved margins and more stable earnings growth. This is especially crucial given the ongoing investments in AI and the persistent regulatory challenges the company faces.

Key Data Points

• Planned budget reduction for "Reality Labs" of roughly 30%
• Strong analyst price target of $1,117 (Rosenblatt), with consensus near $832
• Current trading range around $649.70 per share
• $190 million reserved for settlement in a data privacy-related shareholder lawsuit