Meta, which operates social media platforms Instagram and Facebook, is rethinking its investments after a group of its products failed to yield profitable results over the past few years.

Meta’s Reality Labs division produces its virtual reality headsets and augmented reality smart glasses, supporting the company’s overall metaverse vision. The division has incurred approximately $73 billion in losses since 2021. 

During the third quarter of 2025 alone, Reality Labs faced a loss of $4.43 billion from operations, according to Meta’s latest earnings report.  

Recent data from market research firm IDC, obtained by The Register, revealed that Meta shipped only 1.7 million Quest virtual reality headsets during the first three quarters of 2025, representing a 16% decline compared to the same period in 2024.

“All of these ideas that AR (augmented reality) and VR (virtual reality) would replace smartphones didn’t happen,” said Francisco Jeronimo, vice president for data and analytics at IDC, 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 declined in recent years.

According to Google Trends data, “metaverse” was a search term that reached its peak between late 2021 and early 2022 and has since declined in popularity. 

A survey conducted by YouGov in February last year found that the majority of Americans had not used the metaverse in 2024.

What’s holding Americans back from using the metaverse:

  • Only 26% of Americans have used the metaverse in the past 12 months. 
  • Approximately 1 in 10 Americans said that no brand presence would tempt them into the metaverse.
  • Additionally, 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% 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

Meta lays off employees amid struggles

As Meta faces declining metaverse consumer demand, it has decided to lay off over 1,000 employees in its Reality Labs division, according to a recent report from Bloomberg. 

The division currently has about 15,000 employees, so the layoffs will shrink the team by about 10%. The job cuts come after Meta CEO Mark Zuckerberg and other company executives began eyeing potential budget cuts as high as 30% for the company’s metaverse business last month. 

“Starting today, VR will operate as a leaner, flatter organization with a more focused road map to maximize long-term sustainability,” wrote Meta Chief Technology Officer Andrew Bosworth in an internal employee memo obtained by Bloomberg.

Related: Read the leaked email Meta sent to the employees it just fired

He also said that Meta will continue to develop the metaverse, but will focus more on bringing artificial intelligence creator tools to mobile devices, rather than intensely developing virtual reality headsets. The company will continue to develop virtual reality headsets, but at a slower pace.

The sharper focus on AI comes during a time when Meta and EssilorLuxottica SA are reportedly in talks to double AI Ray-Ban smart glasses production to 20 million units by the end of this year.

In addition to layoffs, a separate internal memo reviewed by Bloomberg revealed that Meta is shutting down three of its in-house virtual reality game and content studios. This includes Sanzaru, Armature and Twisted Pixel. 

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  • Google quietly doubles down on a controversial workplace trend
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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 do not mean we are moving away from video games,” wrote Tamara Sciamanna, director of Oculus Studios, in the internal memo. “Gaming remains the cornerstone of our ecosystem. With this change we are shifting our investment to focus on our third-party developers and partners to ensure long-term sustainability.”

Meta is following a concerning workforce trend

The layoffs at Meta come after the company reduced its workforce by about 5% last year through job cuts aimed at eliminating low-performing employees. 

Many companies across the country have followed in Meta’s footsteps in 2025, and they plan to continue this concerning workforce trend this year, with AI playing a critical role in job cuts, according to a recent survey from Resume.org.

How U.S. companies are eyeing layoffs in 2026:

  • In 2025, most U.S. companies ramped up their investment in AI, with 27% reporting a significant increase and 41% noting a slight increase.
  • Economic uncertainty, trade policy and AI adoption were the top reasons for layoffs in 2025.
  • Approximately six in 10 companies will likely lay off employees in 2026. 
  • Also, 37% expect to replace roles with AI by the end of this year.
    Source: Resume.org

“AI adoption is going to reshape the job market more dramatically over the next 18 to 24 months than we’ve seen in decades,” said Kara Dennison, head of career advising at Resume.org, in a statement.

“We’ll see continued displacement of routine and process-driven roles as well as entirely new categories of work centered on AI oversight, data ethics, prompt engineering, and human-AI collaboration,” she continued.

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