Meta’s VR Layoffs and Studio Shutdowns Highlight Zuckerberg’s Sharp Turn Toward AI

Just over four years after Mark Zuckerberg rebranded Facebook as Meta to signal a future centered on the metaverse, the company is pulling back sharply from virtual reality. This week, Meta began laying off more than 1,000 employees in its Reality Labs division — roughly 10% of its hardware unit — and closed several studios developing VR titles, according to people familiar with the matter.

The cuts affect teams working on Quest VR headsets and Horizon Worlds, Meta’s virtual social platform, and include the shutdown of studios such as Armature Studio, Twisted Pixel and Sanzaru, as well as a central technical unit supporting Oculus Studios. Meta also placed Supernatural, the VR fitness app it acquired for $400 million in 2023, into maintenance mode, halting new content development.

The retrenchment reflects Meta’s broader strategic shift away from large-scale VR ambitions toward artificial intelligence, now the company’s top priority. Zuckerberg has accelerated spending on AI talent and infrastructure, including a $14.3 billion deal last year to bring in Scale AI founder Alexandr Wang, who now leads Meta’s AI strategy. Capital expenditures for 2025 were raised to $70 billion–$72 billion, with even higher spending expected in 2026.

Reality Labs has struggled financially since its inception. Since late 2020, the division has accumulated more than $70 billion in losses, including a $4.4 billion loss on $470 million in revenue in the most recent reported quarter. VR products have failed to gain mass adoption, and Horizon Worlds has never attracted more than a few hundred thousand monthly active users.

Meta is not abandoning immersive technology altogether, but is reallocating resources toward areas showing stronger traction. The company has found more success with AI-powered wearables, particularly through its partnership with EssilorLuxottica on Ray-Ban Meta smart glasses, which have seen stronger-than-expected demand in the U.S.

Within VR, Meta is repositioning Horizon Worlds to resemble platforms like Roblox, emphasizing mobile access and simpler, creator-driven experiences aimed at younger users. The company has launched a $50 million Creator Fund to encourage mobile-first content and plans tighter integration with Facebook and Instagram.

The VR pullback comes as Meta races to keep pace with rivals such as OpenAI and Google, whose AI models have gained rapid adoption. Meta plans to debut its next-generation AI model, codenamed Avocado, later this year.

For investors, the layoffs mark a clear acknowledgment that the metaverse vision has fallen short — and that Meta’s future bets now rest firmly on artificial intelligence rather than virtual worlds.