Meta’s Reality Labs has been bleeding cash for years, accumulating losses exceeding $70 billion since 2021 (including an operating loss of $4.4 billion in Q3 2025), thus enlarging the gap between Mark Zuckerberg’s vision of a virtual universe and the market’s response to it. Now, the social media company is gearing up to slash roughly a tenth of its workforce in the division responsible for virtual reality, augmented reality, and the company’s once-central vision of the metaverse.
With the unit employing about 15,000 people, the reduction would translate into more than 1,500 job cuts, making it one of the most significant restructurings since Meta began scaling back its most speculative projects. Despite the cuts, Reality Labs is not being dismantled. Teams working on augmented reality hardware and next-generation wearables are expected to remain largely intact. In addition to this, reports reveal that Andrew Bosworth, Meta’s chief technology officer and the executive overseeing the division. Bosworth has called an in-person meeting described as the most consequential of the year.
From the looks of it, the layoffs coincide with Meta’s shift of redirecting resources away from capital-intensive virtual reality products and toward artificial intelligence and wearable devices, areas where early commercial traction has been stronger. Smart glasses developed in partnership with EssilorLuxottica, particularly under the Ray-Ban brand, have emerged as a rare bright spot within Reality Labs, combining hardware with Meta’s AI assistant in a form factor that consumers appear more willing to adopt. Unlike fully immersive VR headsets, smart glasses integrate more seamlessly into daily life, offering incremental utility rather than demanding behavioral change.
Reality Labs traces its origins to Meta’s 2014 acquisition of Oculus, a deal that had laid down the foundation for its push into immersive computing. That effort culminated in Zuckerberg’s decision to rebrand Facebook as Meta five years ago, placing the metaverse at the center of the company’s identity. Yet despite years of development, the core promise of a shared virtual world where people work, socialize, and play has failed to resonate with a broad audience. High headset prices, limited content, and user fatigue with fully immersive experiences have all contributed to sluggish adoption. Competitors that were expected to challenge Meta in virtual worlds never materialized at scale either, revealing that while Meta has provided the supply, the anticipated demand for such services and equipment failed to materialize. For instance, Quest headset shipments amounted to 1.7 million in the first three quarters of the previous year, marking a 16% decline.
This comes at a time when AI has consistently been the darling of the tech sector, with more and more companies across the globe investing billions in AI systems and related infrastructure. Meta faces intense competition from companies such as OpenAI and Google, and the recent lukewarm reception to its latest large language models has heightened the urgency to refocus. It seems that by freeing up capital and engineering talent from VR projects, Meta aims to accelerate development of AI systems that can be embedded across its core products, from advertising to messaging to hardware.
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