Meta’s Reality Labs division, long the epicenter of its metaverse ambitions, has now claimed over $73 billion in losses since late 2020, prompting a sweeping overhaul that eliminated more than 1,000 jobs this week.
On January 13, 2026, the company notified employees of the cuts, affecting about 10% of the division’s 15,000-person workforce. Chief Technology Officer Andrew Bosworth detailed the changes in an internal memo, emphasizing a shift from virtual reality pursuits to AI-driven wearables and smart glasses. This move comes amid relentless quarterly deficits, with Q3 2025 alone recording $4.4 billion in operating losses against $470 million in revenue. Annual figures underscore the strain: approximately $16-17 billion lost in 2024 and $16.12 billion in 2023.
The restructuring dissolves entire units focused on VR hardware, software, and metaverse platforms, redirecting resources to products showing commercial promise.
Mounting Financial Pressures
Reality Labs has sustained heavy losses since Meta’s 2021 rebrand from Facebook, when executives bet heavily on immersive VR and AR experiences. Platforms like Horizon Worlds and Quest headsets failed to generate sustainable revenue, eroding investor confidence. Internal leadership changes in 2025 hinted at this reckoning, as smart glasses outperformed bulkier VR devices. Executives weighed cuts up to 30% amid employee unease, aiming for long-term viability in a division that has drained billions without profitability.
The pivot reflects broader market realities, where VR funding has dwindled—evidenced by closures like Ready at Dawn in August 2024 and the merger of Downpour Interactive into Camouflaj in June 2025.
Job Cuts Target Core Teams
The layoffs, starting January 13, hit VR development hardest. Meta permanently closed three first-party game studios: Sanzaru Games, known for Moss and Asgard’s Wrath; Twisted Pixel, creator of Marvel’s Deadpool VR; and Armature Studio, which ported Resident Evil 4 VR. These shutdowns end Meta’s era of exclusive VR content production, displacing hundreds of developers and artists.
Within hours, former staff updated LinkedIn profiles with “Open to Work” banners and shared portfolios. Families in tech hubs like Austin and Seattle faced sudden disruptions, as careers tied to the metaverse vision scattered into a tight job market.
Surviving studios include Beat Games (Beat Saber) and BigBox VR, signaling a preference for proven revenue generators over experimental gaming. Camouflaj, developer of Batman: Arkham Shadow, was reduced to a skeleton crew of just a handful of employees working on user experience for upcoming hardware rather than game development. A planned Batman: Arkham Shadow sequel was cancelled following the restructuring.
Shift to AI Wearables
Savings from the cuts fuel investment in AI hardware, particularly Ray-Ban Meta smart glasses. Since their October 2023 launch, sales have reached 2 million units, with production scaling to 10 million annually by late 2026—potentially doubling thereafter. Year-over-year growth topped 300% in the first half of 2025, contrasting sharply with lagging Quest headset sales.
Bosworth’s memo followed a November 2024 assessment framing 2025 as a make-or-break year for Reality Labs. A spokesperson confirmed the investment realignment from metaverse to wearables. Upcoming Project Phoenix, a lightweight AR-VR hybrid slated for early 2027, represents a potential bridge in Meta’s hardware strategy.
Industry watchers note this efficiency drive, even as cumulative losses fuel doubts.
Human Impact and Studio Legacy
Laid-off workers expressed frustration online, highlighting the toll on creators while leadership stays intact. Morale dipped ahead of Bosworth’s January 14 all-hands meeting, billed as the year’s most critical. The closures erase marquee VR titles, dimming the ecosystem for Quest users and third-party developers amid rivals like PlayStation VR2.
Talent from the shuttered studios—builders of acclaimed franchises—now seeks new roles, their expertise a casualty of the pivot. Oculus Studios Central Technology also dissolved, curtailing mobile Horizon development in favor of wearable priorities.
Uncertain Path Forward
Meta’s strategic turn raises questions about VR’s viability. While Ray-Ban success validates AI wearables, skeptics debate full abandonment of immersive tech. Beat Saber’s survival suggests gaming niches endure, but a content shortage looms for Quest. Project Phoenix could revitalize mixed reality, yet $73 billion in losses tempers optimism. Investors and observers weigh whether this reset toward glasses averts a “legendary misadventure” or merely postpones deeper retreats, with Reality Labs’ sustainability hanging in the balance.
Sources:
“Meta Begins Job Cuts as It Shifts From Metaverse to AI.” Bloomberg, January 13, 2026.
“Meta’s Reality Labs posts $4.4 billion loss in third quarter.” CNBC, October 29, 2025.
“Meta Plans to Cut 10% to 15% of Employees in Reality Labs.” The New York Times, January 12, 2026.
“Meta Closes Twisted Pixel, Sanzaru Games, And Armature Studio.” Game Informer, January 13, 2026.
“Batman: Arkham Shadow Sequel Canceled As Camouflaj Sees Significant Layoffs.” UploadVR, January 15, 2026.
“Ray-Ban Meta smart glasses revenue tripled over the year.” CNBC, July 28, 2025.