Is the “year of efficiency” Mark Zuckerberg back at Meta Platforms ? Shares of the social media giant rallied more than 5% to $676 each at Thursday’s highs after Bloomberg reported that Zuckerberg is set to reduce metaverse spending up to 30%. The metaverse group, which works on the company’s virtual “Horizon World” environment and Quest line of virtual reality headsets. It’s been a long time coming. Meta stock took a beating back in 2022 when, in addition to aggressive interest rate hikes from the Federal Reserve to combat sky-high inflation, investors grew concerned that Zuckerberg was going to spend countless sums of money building out a virtual world with little idea as to when, or even if, the investment would see any return. Since then, Zuckerberg has smartly avoided much talk about the metaverse. Wall Street is wondering whether cutting the metaverse budget is a true turning point for Zuckerberg, who has been on an artificial intelligence spending spree, both on the capital expenditures side and in poaching AI talent for top dollar, or whether it’s more about facing the reality that he’s been throwing good money after a vanity project that no one cares about. That spending question has been top of mind as Meta shares have dropped more than 20% since reporting earnings in late October , on fears that Zuckerberg was losing his way on efficiency and preparing to continue to ramp up investments without a clear view on returns. Judging by Thursday’s rally in Meta shares, the Bloomberg report has eased some of those concerns. We remember the power of spending discipline: Zuckerberg dubbed 2023 the “year of efficiency,” embarking on massive layoffs and cost-cutting. Shares surged nearly 195% in 2023, followed by a 65% gain last year. The metaverse and other VR-related investments are housed within the company’s Reality Labs operating segment, alongside the company’s smart glasses. Reality Labs lost just over $4.4 billion in the last quarter alone, with Bloomberg highlighting more than $70 billion in losses since its launch in 2021. The article does not appear to indicate a pullback in smart glasses investments, which, by all indications, have been better received by the mass market than the company’s virtual reality offerings. Bloomberg does report that Zuckerberg still believes in the metaverse and thinks that people will one day work and play in virtual worlds. META 5Y mountain Meta Platforms 5 years Our view? While focusing on a future metaverse isn’t wrong, it’s just a difficult narrative for investors to digest. When folks hear the term metaverse, they think about a digital playground that is nothing more than a highly immersive video game or entertainment experience. From that point of view, it’s easy to understand the skepticism about a return on investment on such a big swing. As Meta shareholders for the Club, we applaud any decision to cut spending on the more ambitious aspects of the metaverse vision, but take a different view of Zuckerberg’s north star. The technology needed to achieve his vision will still be invested in, just in a more methodical manner. Zuckerberg is choosing to focus on the technology that can be monetized more quickly, such as smart glasses and AI, while leaving open the idea of a metaverse-like world in the future. You aren’t going to be able to run a fully immersive digital world, in which players/users can interact, without AI. So, rather than talk about the grand vision of a metaverse, Zuckerberg can simply talk about AI and how it’s helping in the here and now, by reducing costs and boosting engagement, while aiding topline growth. That’s a narrative investors are all too happy to talk about. The recently released display glasses — which take the idea of smart glasses to the next level without the bulk of VR goggles — would certainly lend themselves to user interactions in a virtual environment. By tying that effort to the screenless Ray-Ban and Oakley smart glasses, Zuckerberg has a better chance to start monetizing the research R & D investments that went into the metaverse in the first place. We think that Zuckerberg’s long-term view hasn’t changed so much as he has learned to be more methodical in his long-term investing roadmap, while at the same time becoming a better storyteller as it relates to the narrative of these investments. We think this bodes well for 2026 earnings – perhaps a cost guidance cut with the next earnings release – and perhaps, even more important given Meta’s already attractive valuation, a reversal of the negative sentiment since the company last reported what were nothing short of fantastic quarterly results. Analysts at Mizuho are out with a note following the Bloomberg report, saying such metaverse cuts could add as much as $2 to 2026 earnings per share. Assuming a valuation multiple of 20 to 25 times earnings, that would be expected to add anywhere from $40 to $50 to the share price. “The stock is up, but it’s not up nearly as much as I think it could be given the fact that it’s only up 13% for the year, and is not expensive on a P/E multiple,” Jim Cramer said Thursday during the Club’s Morning Meeting . On a forward basis, the stock trades at 22.3 times full-year 2026 earnings estimates. That’s right in line with the S & P 500 ‘s valuation, despite expectations that Meta can grow earnings twice as fast in the coming year as the overall market. (Jim Cramer’s Charitable Trust is long META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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https://www.cnbc.com/2025/12/04/mark-zuckerberg-comes-to-his-senses-on-metaverse-spending-and-were-thrilled.html
