Alibaba Layoffs Hit Metaverse Division: Will The Chinese E-Commerce Giant Double-Down On AI?

Chinese e-commerce giant Alibaba Group Holding Limited BABA recently made cuts to its metaverse division, Yuanjing, as part of a broader trend of tech companies scaling back their investments in the once-hyped sector. 

The Details: Alibaba has laid off dozens of employees in its metaverse unit as part of its restructuring efforts designed to improve efficiency and optimize operations, according to sources and reported by the Alibaba-owned South China Morning Post. 

The company's metaverse unit, established in 2021 during a period of intense interest in the concept, had previously employed hundreds of people and received billions of yuan in funding.

The division will continue to operate despite the layoffs, focusing on metaverse applications, tools, and services for clients, the source reported. 

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Alibaba’s metaverse-related projects have included leading a $60 million funding round in Chinese augmented-reality (AR) glasses maker Nreal. Alibaba's Yuanjing unit also developed a cloud-based operating system for using the metaverse with gaming and industrial applications.

Alibaba did not provide details regarding the layoffs, often called “optimization” in China, but the cuts come as other tech companies increasingly turn away from the metaverse and focus their efforts on AI applications. Meta Platforms, Inc. META announced cuts to its metaverse division, Reality Labs last year and reported a $4.4 billion loss in the division with its third-quarter earnings last week. 

Investors may learn more details about Alibaba's Yuanjing unit and restructuring efforts when the company reports its second-quarter financial results on Nov. 15 before the opening bell.

According to estimates from Benzinga Pro, analysts expect the company to report earnings of $2.10 per share and quarterly revenue of $33.95 billion. 

Price Action: According to data from Benzinga Pro, Alibaba shares are up 1.58% at $99.12 at the time of publication Monday. 

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