Meta’s metaverse plan was once presented as the next great social platform. Now the company is reportedly pulling back from much of that virtual reality effort, while putting more attention on AI, smart glasses and products with clearer consumer traction.
A Smaller Reality Labs
Meta reportedly laid off roughly 1,500 employees from its Reality Labs division last week, according to The Wall Street Journal. That is about 10% of the unit’s staff, and the cuts came alongside the shutdown of several VR game studios.
The move is a sharp reversal for a company that rebranded from Facebook to Meta in 2021. At the time, Meta tied its identity to a vision of people socializing, working and playing inside virtual worlds through VR devices and Meta’s Horizon Worlds app.
Several VR projects and teams have now been affected. CNBC reported casualties including Armature Studio, which made "Resident Evil 4 VR"; Twisted Pixel, which made "Marvel’s Deadpool VR"; and Sanzaru, which made "Asgard’s Wrath". Supernatural, the VR fitness app Meta acquired in 2023 for $400 million, will no longer produce new content and will move into "maintenance mode".
Camouflaj, the studio behind "Batman: Arkham Shadow", has also been affected by layoffs, according to GeekWire. The Verge also reported last week that Workrooms, Meta’s program for bringing VR to work, is shutting down.
Why the Original Bet Was So Large
The metaverse was more than a product line for Meta. It was a strategic attempt to define a new social platform around VR headsets, games and virtual spaces.
Part of the logic was that Gen Z was already spending time socializing inside online games such as Fortnite and Roblox, instead of only using traditional social media apps. The rebrand also helped Meta move attention away from the damaged Facebook brand, which had been associated with Cambridge Analytica, reports from Frances Haugen, Congressional hearings over digital surveillance, misinformation and monopolistic practices.
Meta also had a platform motive. Mark Zuckerberg had described the experience of building on other companies’ platforms as formative for his view of the technology industry, pointing to Apple and Google’s app store power. The metaverse offered Meta the possibility of owning more of the software, commerce and developer ecosystem around a new computing platform.
That ambition was enormous. Meta put some $73 billion into Reality Labs. The company also talked about the metaverse reaching a billion people in the next decade and supporting "hundreds of billions" of dollars in digital commerce, while analysts such as McKinsey & Co. and Citi issued their own multi-trillion-dollar forecasts for 2030.
Adoption Never Matched the Vision
The central problem was that Meta’s VR world did not appear to become a mass-market habit at the scale the company needed. Reality Labs lost money at a rate that worried investors and had never turned a profit.
Meta did gain a majority share of the VR market with Oculus headsets, but headset demand was still not moving in the right direction. Counterpoint Research said global VR headset shipments fell by 12% year-over-year in 2024, the third consecutive year of declines. Meta accounted for 77% of those 2024 headset shipments.
App activity showed the same tension between progress and scale. According to modeled estimates from Apptopia, the Meta Horizon app has been downloaded 60.4 million times globally and 39.8 million times in the U.S. since May 2018. Average sessions per daily active user in the U.S. rose from 3.49 in January 2023 to 4.93 in January 2026.
Those figures suggest that some users were engaging more with the app. But they also sit beside a much larger comparison: Meta now has over 3.5 billion daily active users across Facebook, Instagram, WhatsApp and Messenger outside of VR.
Developers and Safety Added Friction
Meta also faced resistance from creators before VR had become a major platform. The company announced plans to take 47.5% of sales of digital assets within Horizon Worlds, made up of a 30% hardware platform fee and another 17.5% Horizon Worlds fee. Creators were not happy.
That decision mattered because Meta needed developers to build the experiences that would make VR more compelling. Instead, the platform economics looked difficult before the audience had clearly scaled.
User safety was another major weakness. Meta introduced a "Personal Boundary" feature after reports that users were experiencing sexual harassment in the metaverse, including virtual rape and gang rape in Horizon Worlds. The company later adjusted that feature so it defaulted to "on" only when a user interacted with "non-friends", while also allowing users to switch it off entirely.
In May 2022, Meta described tools including blocking and reporting features, a "safe zone" button to block and mute others, and a feature to temporarily remove disruptive people from venues. But it declined to say what actions it would take against individual bad actors.
Users told TechCrunch that people who faced abuse often removed their headset and stepped away from VR rather than recording the incident. When they returned, the harasser could still appear in recent encounters, while the chance to submit a report with video and audio attached had passed.
AI and Smart Glasses Took the Spotlight
The pullback from VR comes as Meta has seen stronger signals around other hardware and AI products. Its Ray-Ban AR glasses gained consumer interest with features such as hands-free recording, music streaming and Meta AI chat. The glasses began to outsell traditional Ray-Bans in some retail stores in 2024.
Meta has considered doubling output of the glasses to meet demand, according to Bloomberg. The company also introduced Ray-Ban Display last year, adding a display for apps, alerts and directions on the right lens, though it later paused international plans and cited "unprecedented demand".
With OpenAI, Amazon and various startups also looking at hardware AI devices as possible computing platforms, VR now looks less central to Meta’s future than it did after the 2021 rebrand. The company is shifting attention toward products with more visible momentum: Ray Ban and AI glasses, AI app growth and large language models.
The metaverse is not erased from Meta’s history. But the reported Reality Labs cuts, studio closures and Workrooms shutdown show that the company’s next platform bet has moved elsewhere.