Meta has started one of its biggest strategic resets of 2026 by cutting over 1,000 jobs. The layoffs are focused on the company’s Reality Labs division, which looks after Meta’s VR, AR, and metaverse-related products. As per the Bloomberg report, on 14th January, the company eliminated a total of 10% of its Reality Labs workforce and shut numerous VR game studios after the division accumulated more than $70 billion in losses over the last six years. With this layoff decision, the company plans to reallocate billions in spending from VR to AI and Ray-Ban-branded smart glasses, signaling a decisive shift in priorities.
Over four years after rebranding from Facebook, Meta is making a significant retreat from its VR goals by cutting jobs and closing multiple VR game studios. This restructuring decision has been taken after the major loss since 2020 and follows a major shift in Meta’s capital spending. The company confirmed the layoff does not impact Instagram, Facebook, or WhatsApp, and they continue to generate the bulk of the company’s revenue. The ad growth and AI-driven content tools inside these platforms are the focus areas of Meta’s overall business operation.
Meta built the foundation for this announcement in December, when the company said it would shift the resources of Reality Labs’ budget from its VR initiatives towards its initiatives with AI glasses and wearable devices.
At present, Meta is not exiting immersive technology altogether but is clearly shifting its focus. Now, smart glasses are the priority. Ray-Ban Meta glasses have seen higher consumer demand than VR headsets, with over two million units sold. Meta made this decision following increased pressure from heavy losses and rising competition in AI-powered wearables from rival companies like Google and Apple.
While Meta pivots towards smart glasses, competitors are also advancing. Apple is refining its AI strategy and exploring lightweight smart glasses, while Google is pushing Android XR by collaborating with Samsung and focusing on building an open ecosystem for headsets and AI glasses. Snap is doubling down on AR, planning to launch AI-enhanced Spectacles with in-built displays and AR-based cameras. Today’s race is not limited to virtual worlds only; it is about who defines the next computing interface.
Shutting down Multiple VR Studios
As per this shuffle, Meta moves to close its three in-house VR game and content studios—Sanzarun, Armature, and Twisted Pixel—as shared in media reports. These studios were focusing on VR-centered titles and content for the Quest platform. For now, the company will continue operating its five other studios, including BigBox, Glassworks, Camouflaj, Ames, and OURO, highlighting that the company is not exiting VR content completely but is reducing its efforts.
The Primary Reasons behind the Layoff
The hype around the idea of a metaverse, at one point, quickly faded. The company was mocked for its legless virtual avatars and could not turn its Horizon Worlds metaverse products into popular ones.
Instead of renewing the company, the goal dragged on Meta’s finance. In 2024, the company spent around 21% of its total spending on the Reality Labs even after the loss of $17.7 billion in the division. For months, this segment has survived on Meta’s social media ad profits.
After finding large audiences for Meta’s wearables, Zuckerberg decided to move the investment toward this segment.
A Meta spokesperson told Bloomberg, “We said last month that we are shifting investment from metaverse to wearables to support the growth of wearables this year.” For reference, Meta’s Oct quarterly earnings showed Reality Labs posted a loss of $4.4 billion while the unit generated $470 million.
With this layoff, Meta is moving towards a cautious approach, focusing on team streamlining and shutting down studios that do not align with its upcoming goals.
No doubt, smart glasses and AI assistants are promising, but the competition is fierce. For Meta, the major challenge is execution. The success will depend on hardware design, privacy safeguards, and better battery life in everyday use. The key advantage of Meta is its AI research depth and its ability to integrate services across billions of users.
Frequently Asked Questions
Who was affected by the latest Meta layoffs?
Meta has announced plans to lay off employees in its virtual reality products, VR-based social network, and several VR gaming studios.
Why did Meta fire over 1000 Reality Labs employees?
The company has decided to move the budget resources from its metaverse unit to its AI-powered glasses and wearables department.