Meta CEO Mark Zuckerberg demonstrates an Oculus Rift virtual reality (VR) headset and Oculus Touch controllers during the Oculus Connect 3 event in San Jose, California, U.S., on Thursday, Oct. 6, 2016.
David Paul Morris | Bloomberg | Getty Images
A little over four years after Mark Zuckerberg changed Facebook’s name to Meta, reflecting his view that the future of work, play and socializing was going virtual, the company is making a major course correction.
Meta this week began laying off employees focused on virtual reality within its Reality Labs division and is shutting down a number of studios that were working on VR titles, according to people familiar with the matter who asked not to be named due to confidentiality. CNBC confirmed a report from the New York Times that layoffs, amounting to more than 1,000 jobs, will impact about 10% of the hardware division, which makes Quest VR headsets, and the Horizon Worlds virtual social network.
Andrew Bosworth, Meta’s chief technology officer, is slated to hold an all-hands meeting with Reality Labs on Wednesday, some of the people said.
Meta is scaling back its metaverse ambitions as the company continues ramping up its investments in artificial intelligence, Zuckerberg’s more recent obsession and the technology that’s consumed Silicon Valley and the broader industry. Zuckerberg has been paying big bucks for top AI talent, most notably shelling out $14.3 billion in June to hire Scale AI founder Alexandr Wang, who’s now leading AI strategy, along with other engineers and researchers from the startup.
In October, Vishal Shah, who spent four years leading the company’s metaverse efforts, was named vice president of AI products. That month Meta lifted the range of its 2025 capital expenditures to between $70 billion and $72 billion and said dollar growth would be “notably larger” in 2026.
The studios that are closing as part of the latest changes include Armature Studio, Twisted Pixel, and Sanzaru, as well as a technical unit called Oculus Studios Central Technology, sources told CNBC. Jobs are also being cut at other studios including Ouro Interactive, which Meta debuted in 2023 to build first-party content for Horizon Worlds.
Supernatural, a VR fitness app that Meta purchased for $400 million in 2023, was moved into maintenance mode, meaning it will be run by a skeleton crew and no longer receive new content, said people with knowledge of the matter.
Meta laid the groundwork for this week’s announcement in December, when the company said it would be shifting resources within Reality Labs’ budget away from its VR initiatives toward its endeavors with AI glasses and wearable devices.
“This is part of that effort, and we plan to reinvest the savings to support the growth of wearables this year,” a Meta spokesperson said, without commenting specifically on the layoffs.
While Meta’s VR projects have never taken off, the company has had better success in AI-powered wearables, particularly through a partnership with EssilorLuxottica to make Ray-Ban Meta smart glasses.
In September, the two companies unveiled the Meta Ray-Ban Display glasses, which cost $799 and contain a single, built-in display that shows users small messages and previews of photos. Meta said last week that it would delay the global debut of the display glasses, citing “limited” inventories amid “unprecedented” U.S. demand.
Luxottica CFO Stefano Grassi said in October that his company will be able to reach the 10 million unit capacity for the glasses that it had originally planned to hit by the end of 2026 earlier than anticipated.
More like Roblox
Despite the downsizing, Meta isn’t abandoning VR.
The company is courting developers who build games for Roblox, a virtual world gaming platform popular with kids, to build experiences for Horizon Worlds, sources said. Roblox says it has more than 150 million daily users, while Horizon, which Zuckerberg showcased at the time of the company name change, has never drawn more than a couple hundred thousand active users a month.
By taking cues from the likes of Roblox and Minecraft, which Microsoft acquired in 2014, Horizon Worlds could serve as a funnel for Meta to attract a younger audience to its services.
Last year Bosworth directed the company to turn Horizon Worlds into a hit smartphone app, after beginning a test of a mobile version in 2023, people familiar with the matter told CNBC. Meta moved employees from other parts of Reality Labs onto the Horizon Worlds team in 2025, ex-employees said.
Ben Hatton, an analyst for CCS Insight who covers connected devices, said the underperformance of VR headsets and the continuing growth of mobile forced Meta’s hand.
“It kind of follows that Meta will be moving it towards mobile as mobile gaming has become very popular over the last five years or so,” Hatton said.
Ouro is one of the studios that will be working on mobile content for Horizon Worlds, people said.
Andrew Bosworth, chief technology officer of Meta Platforms Inc., speaks during a Bloomberg Television interview on the sidelines of the Meta Connect event in Menlo Park, California, US, on Wednesday, Sept. 25, 2024.
David Paul Morris | Bloomberg | Getty Images
Meta’s decision to scale back its VR efforts comes 12 years after Facebook entered the market with the $2 billion purchase of Oculus VR. Since late 2020, Meta’s Reality Labs division has logged over $70 billion in cumulative losses. In its latest quarterly earnings in October, Meta said Reality Labs recorded a $4.4 billion loss on $470 million in sales.
Meanwhile, the company is wrestling with a scattershot AI strategy as it tries to keep pace with OpenAI and Google, whose large language models and AI features are soaring in popularity. Meta plans to release its next frontier model, codenamed Avocado, in the first quarter of this year, CNBC reported last month.
Meta’s stock price badly trailed Alphabet’s last year and came up short of the Nasdaq, a trend that’s continued in the early days of 2026, with the shares down more than 4% since the calendar changed.
Horizon Worlds has been a struggle from the start.
In August 2022, 10 months after Zuckerberg announced plans to go all-in on the metaverse, he posted a photo to his Facebook profile showing his avatar in front of animated versions of the Eiffel Tower and Spain’s Basílica de la Sagrada Família. The picture was lambasted on social media for its low-quality graphics. Zuckerberg posted a new image days later of an improved version of his avatar, promising users that “major updates to Horizon and avatar graphics” were coming soon.
But inside Horizon Worlds, the photo fiasco was a defining moment, according to people familiar with the matter. Zuckerberg called a meeting with the team responsible for VR avatars demanding improvements, one of the people said.
Multiple VR developers told CNBC that Horizon Worlds usage remains low based on their observations, adding that the company doesn’t share specific stats. The developers said they’re frustrated because they don’t have accurate information that could help them create more compelling games and experiences.
Rather, in Meta’s refocusing toward a more Roblox-like experience, the company last year began instructing existing third-party Horizon Worlds developers to build kid-friendly, simplistic games.
Deepak Nair, a developer advocate at Meta, discussed the strategy in August with an audience of developers in Berlin, encouraging them to mimic Roblox and Minecraft in building games that let kids create stories they can share with their friends. Nair said a key issue for developers is identifying the right demographic.
“Generally 13 to 24, right?” Nair said. “And even on other ecosystems, it’s even younger than that.”
In February, Meta launched a $50 million Creator Fund intended to entice developers to create more in-game experiences inside Horizon Worlds, with a focus on mobile. The company is planning to make it easy for Facebook and Instagram users to seamlessly access Horizon Worlds, sources said.
— CNBC’s Kif Leswing contributed to this report.
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