Meta lays off VR employees, underscoring Zuckerberg’s pivot to AI
Meta CEO Mark Zuckerberg introduced the Oculus Rift virtual reality (VR) headset and Oculus Touch controllers at the Oculus Connect 3 event held in San Jose, California, USA on Thursday, October 6, 2016.
David Paul Morris | Bloomberg | Getty Images
It’s been just over four years since Mark Zuckerberg changed the name of Facebook MetaReflecting its view that the future of business, entertainment and socializing will go virtual, the company is making a major course correction.
Meta this week began laying off employees focused on virtual reality at its Reality Labs division and is also shutting down some studios working on VR games, according to people familiar with the matter who asked not to be named for privacy reasons. CNBC confirmed report The New York Times said the layoffs, amounting to more than 1,000 jobs, would affect about 10% of the hardware division that produces Quest VR headsets and the Horizon Worlds virtual social network.
Meta’s chief technology officer Andrew Bosworth is scheduled to have an extensive meeting with Reality Labs on Wednesday, some said.
Meta is scaling back its metaverse ambitions as the company continues to ramp up its investments in artificial intelligence, Zuckerberg’s newer obsession, and the technology that is consuming Silicon Valley and the broader industry. Zuckerberg pays big money for top AI talent; most notably, it spent $14.3 billion in June to hire Scale AI founder Alexandr Wang, who now leads its AI strategy along with other engineers and researchers at the startup.
Vishal Shah, who led the company’s metadata efforts for four years, was appointed vice president of artificial intelligence products in October. The same month, Meta increased the range for 2025 capital spending to between $70 billion and $72 billion and said dollar growth would be “markedly larger” in 2026.
Studios 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 is launching in 2023 to create first-party content for Horizon Worlds.
People with knowledge of the matter said that Supernatural, the VR fitness app that Meta bought for $400 million in 2023, was put into maintenance mode, meaning it will be run by a core team and will no longer receive new content.
Meta laid the groundwork for this week’s announcement in December, when the company said it would shift resources in Reality Labs’ budget from VR initiatives to AI glasses and wearables.
“This is part of that effort, and we plan to reinvest our savings to support the growth of wearables this year,” a Meta spokesperson said, without commenting specifically on the layoffs.
While Meta’s VR projects never took off, the company has had better success, especially with AI-powered wearables. EssilorLuxottica Making Ray-Ban Meta’s smart glasses.
In September, the two companies introduced Meta Ray-Ban Display glasses, which are priced at $799 and include a single built-in screen that shows users small messages and previews of photos. Meta said last week that it would delay the global launch of its display glasses, citing “limited” stocks due to “unprecedented” demand from the US.
Luxottica CFO Stefano Grassi said in October that his company could reach a capacity of 10 million units earlier than expected for glasses, which it initially planned to reach by the end of 2026.
More like Roblox
Despite the downsizing, Meta is not giving up on VR.
The company is in talks with game developers robloxTo create experiences for Horizon Worlds, resources were used to create experiences for Horizon Worlds, a virtual world gaming platform popular with kids. While Roblox says it has more than 150 million daily users, Horizon, which Zuckerberg showed off during the company name change, has never attracted more than a few hundred thousand monthly active users.
Horizon Worlds could act as a funnel for Meta to attract a younger audience to its services, taking cues from games like Roblox and Minecraft, which Microsoft acquired in 2014.
Bosworth directed the company last year to turn Horizon Worlds into a popular smartphone app after starting testing a mobile version in 2023, people familiar with the matter told CNBC. Meta moved employees from other parts of Reality Labs to the Horizon Worlds team in 2025, former employees said.
CCS Insight analyst Ben Hatton, who covers connected devices, said the poor performance of VR headsets and the continued growth of mobile devices has forced Meta’s hand.
“As mobile games have become very popular in the last five years, it follows that Meta will move towards mobile,” 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 on Wednesday, September 25, 2024 in Menlo Park, California, United States.
David Paul Morris | Bloomberg | Getty Images
Meta’s decision to scale back its VR efforts comes 12 years after Facebook entered the market with $2 billion to buy Oculus VR. Meta’s Reality Labs division has recorded total losses of over $70 billion since late 2020. In its latest quarterly earnings call in October, Meta said Reality Labs recorded a loss of $4.4 billion on sales of $470 million.
Meanwhile, the company is grappling with a messy AI strategy as it tries to keep up with OpenAI and Google, whose large language models and AI features are rapidly growing in popularity. Meta plans to launch its next flagship model, codenamed Avocado, in the first quarter of this year, CNBC reported last month.
Meta’s stock price has been badly tracked alphabet It lagged the Nasdaq last year, a trend that continues into the early days of 2026, and shares have fallen more than 4% since the calendar changed.
Horizon Worlds was a challenge from the beginning.
In August 2022, 10 months after Zuckerberg announced plans to go all-in on metadata, he posted a photo on his Facebook profile showing his avatar in front of animated versions of the Eiffel Tower and the Basílica de la Sagrada Familia in Spain. The photo was criticized on social media for its low-quality graphics. Days later, Zuckerberg posted a new image of an improved version of his avatar, promising users that “major updates to Horizon and avatar graphics” were coming soon.
But the Horizon Worlds photo fiasco was a defining moment, according to people familiar with the matter. One of the sources said Zuckerberg held a meeting with the team responsible for VR avatars to demand improvements.
Multiple VR developers told CNBC that Horizon Worlds usage remained low based on their observations, and the company did not share specific statistics. Developers said they were frustrated that they didn’t have accurate information that could help them create more engaging games and experiences.
Instead, as Meta refocused on a more Roblox-like experience, the company last year began instructing existing third-party Horizon Worlds developers to develop kid-friendly, simple games.
Deepak Nair, developer advocate of Meta, discussed In August, the strategy was shared with an audience of developers in Berlin, encouraging them to emulate Roblox and Minecraft in creating games that let kids create stories they can share with their friends. Nair said a key issue for developers is identifying the right demographics.
“Usually from 13 to 24, right?” Nair said. “And even in other ecosystems, it’s even younger than that.”
In February, Meta launched a $50 million Creators Fund aimed at encouraging developers to create more In-game experiences in Horizon Worldsmobile focused. Sources said the company plans to make it easier for Facebook and Instagram users to access Horizon Worlds seamlessly.
— CNBC’s Kif Leswing contributed to this report.
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