Meta, which operates social media platforms Instagram and Facebook, is rethinking its investments after a group of its products failed to deliver profitable results in recent years.
Meta’s Reality Labs division produces virtual reality headsets and augmented reality smart glasses, supporting the overall vision of the metaverse company. The division has incurred losses of about $73 billion as of 2021.
During the third quarter of 2025 alone, Reality Labs faced a $4.43 billion loss from operations, according to Meta’s most recent earnings report.
Recent data from market research firm IDC, obtained by The Register, showed that Meta shipped just 1.7 million Quest VR headsets in the first three quarters of 2025, a 16% drop from the same period in 2024.
“All these ideas that AR (augmented reality) and VR (virtual reality) would replace smartphones have not happened,” Francisco Jeronimo, vice president of data and analytics at IDC, said in a statement to The Register. “It will never happen.”
The losses come after Meta spent years investing billions of dollars in its metaverse concept (a 3D virtual world where people socialize, shop, play, etc.) amid innovations in virtual reality technology; however, consumer interest in the metaverse has waned in recent years.
According to Google Trends data, “metaverse” was a search term that peaked between late 2021 and early 2022 and has since declined in popularity.
A YouGov survey last February found that most Americans did not use the metaverse in 2024.
Only 26% of Americans have used the metaverse in the past 12 months.
Approximate 1 out of 10 The Americans said so no brand presence would tempt them into the metaverse.
In addition, 29% of non-metaverse users said they would be more inclined to join if equipment costs were lower.
Also, 23% said that more metaverse activities or experiences that interest them would push them to join.
In comparison, 22% said stronger security and privacy protections could be a deciding factor and 19% they would be more interested if they could use the metaverse without a VR headset. Source: YouGov
Meta lost billions of dollars from its Reality Labs division.Colleen Michaels/Shutterstock” loading=”eager” height=”540″ width=”960″ class=”yf-lglytj loader”/>
Meta lost billions of dollars from its Reality Labs division.Colleen Michaels/Shutterstock
As Meta faces declining demand from metaverse consumers, it has decided to lay off more than 1,000 employees from its Reality Labs division, according to a recent report from Bloomberg.
The division currently has around 15,000 employees, so the layoffs will shrink the team by around 10%. The job cuts come after Meta CEO Mark Zuckerberg and other company executives began looking at potential budget cuts of up to 30 percent for the company’s metaverse business last month.
“Starting today, VR will operate as a leaner, flatter organization with a more focused roadmap to maximize long-term sustainability,” wrote Andrew Bosworth, Meta’s chief technology officer, in an internal employee memo obtained by Bloomberg.
Related: Read the leaked email Meta sent to employees he just fired
He also said that Meta will continue to develop the metaverse, but will focus more on bringing AI creation tools to mobile devices, rather than heavily developing VR headsets. The company will continue to develop virtual reality headsets, but at a slower pace.
The increased focus on AI comes at a time when Meta and EssilorLuxottica SA are in talks to double production of Ray-Ban AI smart glasses to 20 million units by the end of this year.
In addition to the layoffs, a separate internal memo reviewed by Bloomberg revealed that Meta is closing three of its internal virtual reality game and content studios. This includes Sanzaru, Armature and Twisted Pixel.
More work:
Also, Supernatural, Meta’s virtual reality fitness studio, will cease development of new content and features, but will continue to be a supported product.
“These changes don’t mean we’re moving away from video games,” Tamara Sciamanna, director of Oculus Studios, wrote in the internal note. “Gaming remains the cornerstone of our ecosystem. With this change, we are shifting our investment to focus on our developers and third-party partners to ensure long-term sustainability.”
The layoffs at Meta come after the company slashed its workforce by about 5 percent last year through job cuts aimed at weeding out poor performers.
Many companies across the country have followed in Meta’s footsteps in 2025 and plan to continue this workforce trend this year, with AI playing a critical role in job cuts, according to a recent survey from Resume.org.
In 2025, most US companies have stepped up their investments in AIwith 27% reporting significant growth and 41% noting a slight increase.
Economic uncertainty, trade policy and AI adoption were top reasons for layoffs in 2025.
Approximate six out of 10 companies probably will lay off employees in 2026.
Also, 37% expect to replace roles with AI until the end of this year. Source: Resume.org
“The adoption of AI will reshape the job market more dramatically in the next 18 to 24 months than we’ve seen in decades,” Kara Dennison, head of career advice at Resume.org, said in a statement.
“We will see a continued shift in routine and process-based roles, as well as entirely new categories of work centered on AI oversight, data ethics, agile engineering, and human-AI collaboration,” she continued.
Related: Dell issues firm warning after employees violate labor policy
This story was originally published by TheStreet on January 14, 2026, where it first appeared in the Employment section. Add TheStreet as a favorite source by clicking here.
