Meta just axed more than 1,000 jobs in its Reality Labs division this week, shutting down multiple VR studios and putting a $400 million fitness app on life support. The massive layoff marks a dramatic reversal for Mark Zuckerberg, who just four years ago bet the company's entire future on the metaverse. Now his focus has shifted completely to artificial intelligence, with Meta pouring tens of billions into AI infrastructure instead of the VR hardware that was supposed to define the next decade.
A little over four years after Mark Zuckerberg changed Facebook's name to Meta, betting the company's future on virtual reality, he's now pulling the plug on that vision. This week, the company began laying off employees in its Reality Labs division and is shutting down a number of VR studios, amounting to more than 1,000 jobs—about 10% of the hardware division that makes Quest VR headsets and runs the Horizon Worlds virtual social network.
The closure hits multiple studios at once. According to people familiar with the matter, Meta is shutting down Armature Studio, Twisted Pixel, and Sanzaru, along with Oculus Studios Central Technology, a technical unit. Cuts are also coming to other studios including Ouro Interactive, which Meta launched in 2023 to build games for Horizon Worlds. Even worse for VR enthusiasts, Supernatural—a VR fitness app Meta paid $400 million for in 2023—is moving into maintenance mode with a skeleton crew and no new content planned.
The decision represents a fundamental strategic reset. Meta is scaling back its metaverse ambitions as it pours resources into artificial intelligence, Zuckerberg's newer obsession. The numbers tell the story: since late 2020, Reality Labs has accumulated over $70 billion in cumulative losses. In October, the division recorded a $4.4 billion loss on just $470 million in sales. Meanwhile, Zuckerberg is dropping serious money on AI talent—he shelled out $14.3 billion in June to hire Scale AI founder Alexandr Wang to lead AI strategy, bringing over engineers and researchers from the startup.
Vishal Shah, who spent four years leading the metaverse effort, was moved to vice president of AI products in October. At the same time, Meta bumped up its capital expenditure range to between $70 billion and $72 billion for 2025, signaling substantially larger spending in 2026. The company is essentially admitting what's been obvious for years: the metaverse bet didn't work. Horizon Worlds never gained traction—Zuckerberg's showcase platform draws maybe a couple hundred thousand monthly active users, compared to Roblox's 150 million daily users.
Instead, Meta is having better success with AI-powered wearables. The company's partnership with EssilorLuxottica on Ray-Ban Meta smart glasses is actually gaining momentum. The Ray-Ban Display glasses, which launched in September at $799, contain a built-in display showing messages and photo previews. Meta announced last week it's delaying the global debut due to "unprecedented" U.S. demand. EssilorLuxottica CFO Stefano Grassi said in October the company will hit its 10 million unit capacity target earlier than originally planned for end of 2026.
But Meta isn't completely abandoning VR. The company is trying a different approach. It's courting developers from Roblox and Minecraft to build experiences for Horizon Worlds, sources said. The strategy is smart: turn Horizon into a platform for kid-friendly, simple games rather than a sprawling virtual world. Andrew Bosworth, Meta's chief technology officer, directed the shift last year to make Horizon Worlds into a hit smartphone app. Meta moved employees from other Reality Labs teams onto Horizon in 2025, according to ex-employees.
Ben Hatton, an analyst at CCS Insight covering connected devices, said the shift makes sense given market realities. "It kind of follows that Meta will be moving toward mobile as mobile gaming has become very popular over the last five years," Hatton said. The company launched a $50 million Creator Fund to entice developers to build mobile-focused experiences for Horizon Worlds, and it's planning to make Facebook and Instagram users able to access Horizon seamlessly.
This all comes as Meta wrestles with keeping pace in AI. OpenAI and Google have captured mindshare with their large language models. Meta plans to release its next frontier model, codenamed Avocado, in Q1 this year. The company's stock lagged Alphabet significantly last year and has continued sliding in early 2026, down more than 4% since January began. The VR pivot isn't just about redirecting resources—it's about survival in the AI arms race.
The layoffs represent far more than a budget adjustment—they're a public reckoning with one of Silicon Valley's biggest bets. Zuckerberg's metaverse gamble cost the company over $70 billion with nothing to show for it while competitors raced ahead in AI. By shifting focus to AI-powered wearables and repositioning Horizon Worlds as a mobile gaming platform, Meta is essentially admitting the metaverse isn't the future. The question now is whether the company can catch up to OpenAI and Google in the AI race it should have prioritized years ago.
