Meta Platforms Inc (NASDAQ:META, XETRA:FB2A, SIX:FB) is reportedly considering cuts to its Reality Labs (RL) unit and other areas of the business, moves that Bank of America analysts believe could help the company maintain financial discipline while supporting longer-term growth initiatives.
According to Bloomberg, Meta may reduce its 2026 Metaverse budget by up to 30%, primarily affecting the Quest virtual reality unit and Horizon Worlds.
The company is also evaluating broader expense reductions across functional areas, consistent with prior-year planning exercises, per the report.
Bank of America analysts wrote that the potential RL cuts could deliver 6% to 7% upside to 2026 EPS, while other expense reductions might help offset the impact of continued AI investments.
They noted that while costs are still expected to grow materially in 2026, the company “likely has cost contingencies next year to help maintain EPS growth even if there are macro pressures on revenues.”
The analysts added that the news could ease investor concerns about waning financial discipline and the scale of future RL losses.
“Re-allocating spend to bigger perceived opportunities is positive for the stock,” they wrote, highlighting the potential upside from Meta’s generative AI initiatives, including AI assistants, creative tools, and outsourcing of computing capabilities.
Bank of America sees multiple growth drivers for 2026, such as higher usage, AI improvements, ramping monetization in SFV and messaging, and ads in untapped assets including Threads, Meta AI, and Marketplace.
The analysts also pointed to upcoming catalysts, including the launch of a fully automated Meta Business AI ad platform, a new frontier AI model likely in mid-2026, and additional user-facing AI products in the second half of the year.
Following the reports of potential cuts, the analysts expect Meta could initially guide 2026 expenses for 28% to 38% year-over-year growth, with the flexibility to adjust spending based on revenue trends.
The firm repeated its ‘Buy’ rating on the stock, with a price target of $810. Meta shares traded up 1.9% at $673 on Friday afternoon, up 15% so far this year.