Meta’s Reality Labs layoffs raise concerns about ‘VR winter’

metahas deprioritized virtual reality in favor of artificial intelligence and internet-connected smart glasses, which has chilled the industry and led to concerns about its future.

“We know what winter in VR feels like,” said Jessica Young, an independent VR content creator who specializes in Horizon Worlds, Meta’s virtual social network.

The social media giant last week laid off 10% of its employees within its Reality Labs division, with the cuts primarily focused on VR initiatives such as the Quest VR headset, CNBC reported. The team working on Horizon Worlds was hit hard, with some in-house studios closing. About 1,000 jobs were cut, CNBC reported.

The move is part of the company’s efforts to redirect Reality Labs’ investments away from VR and into AI and wearable devices, such as the Ray-Ban Meta smart glasses co-developed with EssilorLuxottica, a spokesperson for the social media company said in a statement last week. Mehta declined to comment beyond his previous statement.

Meta’s reduction in VR spending is notable considering how much the company has contributed to the industry’s growth since acquiring Oculus for $2 billion in 2014. The company became synonymous with VR when CEO Mark Zuckerberg changed its name from Facebook to Meta, reflecting the founder’s obsession with the future of the digital world known as the Metaverse. Since late 2020, Meta’s Reality Labs division has recorded cumulative losses of more than $70 billion.

Zuckerberg’s sudden reversal has some VR developers worried about their future prospects. They said that Meta will not be discontinuing its VR efforts, but it appears that big changes are on the way.

Meta has traditionally announced new Quest VR headsets at its annual Connect conference in the fall, but in 2025 it skimped on VR hardware. Instead, Meta has introduced $799 Meta Ray-Ban Display glasses with one built-in digital screen.

“If Meta doesn’t come out with a new headset for another year or two, it will feel outdated,” Young said. “It’s already kind of a thing.”

Since the layoffs, Metatech chief Andrew Bosworth has been vocal about the social media giant not abandoning VR.

“We continue to invest heavily in this space, but clearly VR growth is not as fast as we had hoped,” Bosworth told technology newsletter Sources. “So we want to make sure our investments are appropriately sized.”

Bosworth also circulated a post this week from Oculus co-founder Palmer Lackey. He wrote in X on Sunday that Meta still employs “the largest team working on VR.”

Lackey said he “really feels bad for the people” affected by the layoffs, but said the changes at Reality Labs represent “a good thing for the long-term health of the industry, especially for continued incentives.”

Market research firm IDC said in a December report that big changes are occurring in the field of so-called augmented reality (XR) devices. This category includes VR and so-called mixed reality headsets that allow users to switch between virtual environments and see their surroundings outside the helmet. This category also includes smart glasses with AI and more powerful versions with digital displays.

IDC predicts that the XR device category will ship to 14.5 million units in 2025, an increase of 41.6% year over year. But that growth has nothing to do with VR or mixed reality headsets. These shipments are expected to decline by 42.8% to 3.9 million units in 2025. The rest of this XR category, which includes AI glasses with and without displays, is expected to reach 3.9 million units, an increase of 211.2% year over year. In 2025, 10.6 million units will be shipped.

Jitesh Ubrani, research manager at market analyst firm IDC, characterizes the VR headset market as niche, appealing only to a select group of video gamers. He said the average consumer doesn’t seem interested in wearing a “big, bulky headset” for long VR sessions, as many in the tech industry wanted about a decade ago.

“The market has spoken,” Ubrani said. “There will be a certain niche audience that will continue to use these headsets, but it’s not going to have broad appeal.”

Andrew Aish, CEO of Google’s VR game studio Owlchemy Labs, said it’s always a mistake to think VR is about to have a breakthrough moment on smartphones. Comparing VR headsets to iPhones is a ‘strategic mistake’, he said

Aish said the VR market is a lot like the old Atari video game console, which was popular until sales plummeted during the infamous 1983 gaming meltdown. It wasn’t until the late 1980s that Nintendo’s game consoles helped revitalize the market and laid the foundation for the entire industry to grow into the massive field it is today.

“A lot of tech people thought (VR) was going to be great right off the bat, and the same thing is happening with AI,” Aish said of the shift to the tech industry’s latest fad. “If you look at the long-term technology, VR is not going anywhere.”

Still, Aish said that in addition to the layoffs at Meta, other VR studios have also recently downsized as part of the broader downturn in the video game industry. Since Quest is the dominant VR headset on the market, its app store is the primary distribution channel for third-party VR.

To make matters worse, Eiche said Meta’s push for Horizon Worlds came at the expense of third-party developers who were trying to increase awareness among Quest users.

“We are at the mercy of Meta,” Aish said, adding: “If Meta backs down, we all back down.”

Eiche said he’s optimistic that gaming company Valve’s upcoming Steam Frame wireless VR headset will help the market, as will the entry of recent devices such as the Samsung Galaxy XR, which debuted in October. apple’s Vision Pro.

However, Apple’s entry into the VR space in February 2024 hasn’t led to much change, and in January IDC said that Apple’s Chinese manufacturing partner Luxshare had stopped producing the new Vision Pro headset, suggesting a lack of widespread consumer demand. Still, Ubrani said Apple’s $3,499 spatial computing headset has gained some foothold as a business tool.

“Apple did well selling to a lot of developers, but they also sold to some very large companies,” Ubrani said.

“There were quarters where Apple beat the meta for enterprises,” Ubrani said. This is partly due to the iPhone maker’s experience selling devices to companies.

The enterprise VR market may not be as attractive as the consumer market, but it represents an area that IDC says is “on the rise, albeit slowly, as companies realize that deploying these headsets comes with significant ROI.”

As part of Meta’s Reality Labs cuts, the company announced on its support page that it is discontinuing its Horizon managed services program for businesses using Quest headsets for internal operations such as virtual employee training.

Sean Mann, CEO of RP1, a startup that is developing a Metaverse browser for people to access virtual reality and augmented reality environments, said Meta failed to understand “how big VR can be if you take a bigger perspective outside of gaming.”

As Meta scales back its VR ambitions and ushers Horizon Worlds into a mobile-centric online gaming platform, robloxYoung said she plans to continue creating experiences on the platform.

Young was able to make a living by getting paid by other Horizon developers to create trailers promoting the experiences available to users on the service. She also earns money from Meta by winning Horizon-related contests aimed at improving the platform as a whole.

But Young said he’s less enthusiastic about Horizon’s mobile push. Because in the early VR-centric era, especially during the coronavirus era, there was something special about this platform.

“Horizon has become a lifeline for people who have been isolated by the pandemic, disability, age, geography, etc.,” she said. “Many users who had no background in art or programming and never imagined they would become creators were inspired by friends to give it a try.”

But Horizon’s loss was so bad, Young said, “What’s frustrating now is seeing people declare Horizon dead without experiencing or understanding what it was.”

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