Meta Axes 1,000 Reality Labs Jobs in Pivot from VR to AI

Meta slashes its metaverse payroll, redirecting resources toward the artificial intelligence arms race.

The Great Pivot

In a decisive strategic shift, Meta is cutting 1,000 positions from its Reality Labs division. The move signals a dramatic reallocation of capital and talent—away from the long-term virtual reality bet and toward the immediate, white-hot competition in generative AI.

Resource Reallocation in Real-Time

The job cuts represent a tangible downscaling of ambition for the VR and metaverse-focused unit. Instead, those billions in operational savings are being funneled into AI infrastructure, model development, and integration across Meta's family of apps. It's a classic tech industry pivot: when one futuristic vision cools, another must be immediately superheated.

Market Signals Over Metaverses

For investors, the message is clear. The patient, decade-long build-out of a virtual ecosystem is taking a backseat to the urgent need to compete with rivals like OpenAI and Google. The market rewards tangible product cycles and near-term monetization—something AI chatbots deliver faster than speculative digital worlds. It's a harsh but familiar calculus: Wall Street's appetite for moonshots shrinks the moment quarterly projections are missed.

One finance cynic might note: nothing focuses a tech giant's strategy like a few quarters of watching NVIDIA's stock price. The future is being rewritten, one cost center at a time.

Expensive vision loses momentum

Reality Labs will now concentrate more on wearable technology, such as its Ray-Ban Meta smart glasses produced in collaboration with partner EssilorLuxottica, and artificial intelligence initiatives, according to Meta. Beyond its first release, the firm declined to speak further.

For a corporation that prioritized virtual reality only a few years ago, the withdrawal represents a significant shift. The current VR market began when Meta paid $2 billion to acquire Oculus in 2014.

When CEO Mark Zuckerberg renamed Facebook to Meta, it signaled his commitment to building what he called the metaverse, interconnected digital worlds where people WOULD work and play. However, that vision has proven expensive. Reality Labs has burned through more than $70 billion in losses since late 2020.

“I can see how it feels like a VR winter,” said Jessica Young, who makes content for Horizon Worlds as an independent creator.

The company’s shift became clear at its Connect conference in 2025. Meta typically unveils new Quest headsets at these fall gatherings, but this time around, no VR hardware appeared. Instead, the company showed off its $799 Meta Ray-Ban Display glasses, which feature a small built-in screen.

“If Meta’s not putting out a new headset for another year or two, it’s going to feel stale,” Young said. “It already kind of does.”

Meta’s technology leader, Andrew Bosworth, pushed back against suggestions that the company is walking away from virtual reality entirely.

“We’re still continuing to invest heavily in this space, but obviously, VR is growing less quickly than we hoped,” Bosworth told tech newsletter Sources. “And so you want to make sure that your investment is right-sized.”

Bosworth also shared a post from Palmer Luckey, who co-founded Oculus, stating that Meta still has the “largest team working on VR by about an order of magnitude.”

Industry faces reality check

Still, market watchers see bigger changes ahead. Research firm IDC noted in a December report that the Extended Reality market, which includes VR headsets, mixed-reality devices, and smart glasses, is going through a major shift.

Jitesh Ubrani, who studies the market for IDC, said VR headsets appeal mainly to a narrow group of video game enthusiasts. Regular consumers haven’t embraced wearing “big, bulky headsets” for extended periods, despite predictions from tech companies about a decade ago that they would.

“The market has spoken,” Ubrani said. “There are certain niche audiences that will continue to use these headsets, but it’s not going to be broadly appealing.”

Andrew Eiche runs Owlchemy Labs, a VR game studio owned by Google. He said the industry made a mistake by comparing VR headsets to smartphones and expecting similar mass adoption. He called this a “strategic mistake.”

Eiche also criticized Meta’s heavy promotion of Horizon Worlds, saying it made life harder for outside developers trying to reach Quest users.

“We’re at the mercy of Meta,” Eiche said, adding that this “creates a situation where if Meta pulls back, we all pull back.”

Meta’s cutbacks included ending a program that helped businesses use Quest headsets for tasks like employee training sessions.

Sean Mann, who leads startup RP1, which makes software for accessing virtual worlds, said Meta missed opportunities by focusing too narrowly on gaming rather than exploring wider uses for VR technology.

Young plans to keep creating for Horizon Worlds even as Meta reshapes the platform into a mobile gaming service similar to Roblox. But she’s not excited about the mobile direction, saying the VR-focused version during the pandemic era had something special that may now be lost.

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