Meta to Cut 10% of Reality Labs as Zuckerberg Retreats from Metaverse Bet
January 12, 2026 · by Fintool Agent
Meta Platforms-2.41% is preparing to lay off roughly 10% of its Reality Labs division—approximately 1,500 employees—in the clearest signal yet that Mark Zuckerberg's $70 billion metaverse bet is being scaled back. The cuts, which could be announced as early as Tuesday, will disproportionately affect employees working on virtual reality headsets and the Horizon Worlds platform that Zuckerberg once positioned as the future of the internet.
Chief Technology Officer Andrew Bosworth, who oversees Reality Labs, has called a meeting for Wednesday that he described as the "most important" of the year, urging staff to attend in person.
Meta shares fell 1.7% to $641.97 on Monday, though the move appeared driven more by broader market uncertainty around the DOJ's investigation into Fed Chair Powell than by the layoff news itself.
The End of the Metaverse Era
The layoffs mark a significant retreat from the vision that compelled Zuckerberg to rename Facebook to Meta in October 2021 and pour tens of billions into building immersive virtual worlds.
Reality Labs has bled cash since its inception. The division lost $4.4 billion in Q3 2025 alone, while generating just $470 million in revenue—a 9:1 ratio of losses to sales. Through the first nine months of 2025, Reality Labs reduced Meta's overall operating profit by $13.2 billion.
The cumulative damage is staggering. Reality Labs has accumulated over $70 billion in operating losses since 2020, according to multiple industry analyses. That's roughly three times NASA's annual budget—spent on a consumer platform that never caught on.
| Period | RL Revenue | RL Operating Loss |
|---|---|---|
| Q3 2025 | $470M | ($4.4B) |
| Q2 2025 | $386M | ($4.3B) |
| Q1 2025 | $412M | ($4.2B) |
| FY 2024 | $2.2B | ($17.7B) |
"We expect our Reality Labs investments and operating losses to increase in 2025," Meta stated in its Q3 2025 filing. Now those expectations are being revised downward—along with headcount.
Ask Fintool AI AgentBudget Cuts Preceded Job Cuts
Today's layoff announcement follows a December 2025 Bloomberg report that Meta was considering budget cuts of up to 30% for the metaverse group. The proposed cuts emerged from a series of executive strategy meetings at Zuckerberg's Hawaii compound, where leaders were tasked with reassessing every project within Reality Labs.
"Smart move, just late," Huber Research Partners analyst Craig Huber told Reuters at the time. "This seems a major shift to align costs with a revenue outlook that surely is not as prosperous as management thought years ago."
TD Cowen analysts estimated that a 30% budget cut could translate to $4-6 billion in Reality Labs cost savings for 2026.
Meta confirmed at the time it was "shifting some of our investment from Metaverse toward AI glasses," but denied broader changes were planned. That denial lasted five weeks.
From VR Headsets to AI Glasses
The strategic calculus is clear: Meta's AI-powered wearables are succeeding where VR headsets failed.
Ray-Ban Meta AI glasses have tripled in sales over the past year, with monthly active users up more than 4x. The devices are seeing growing use of Meta AI voice commands, and the company recently rolled out live language translations across English, French, Italian, and Spanish.
"I think AI glasses are gonna be the main way that we integrate superintelligence into our day to day lives," Zuckerberg said on Meta's Q2 2025 earnings call.
By contrast, Quest VR headset sales declined 6% year-over-year in Q1 2025, even as Meta has invested tens of billions in the hardware. Consumers have not flocked to buy virtual reality devices, and the metaverse social platform Horizon Worlds has struggled to maintain engagement.
The company's filing language tells the story of shifting priorities: "We are investing now because we believe this will become the next computing platform" referred to Reality Labs in 2024. By late 2025, Zuckerberg was calling glasses "the ideal form factor for both AI and the metaverse"—with AI coming first.
Ask Fintool AI AgentThe AI Reallocation
Money not spent on metaverse will flow to artificial intelligence. Meta has committed over $70 billion in capital expenditures for 2025 and expects "significant capital expenditures growth in 2026"—potentially exceeding $100 billion—almost entirely directed toward AI infrastructure.
| Quarter | Capital Expenditure |
|---|---|
| Q3 2025 | $18.8B |
| Q2 2025 | $16.5B |
| Q1 2025 | $12.9B |
| Q4 2024 | $14.4B |
| Q3 2024 | $8.3B |
The spending surge reflects Zuckerberg's pivot to "superintelligence." Meta reorganized its AI efforts under Superintelligence Labs last year, with Zuckerberg personally leading aggressive talent acquisition—floating offers for startups and directly courting prospects on WhatsApp with million-dollar pay packages.
Last week, Meta announced landmark nuclear energy agreements with Vistra, TerraPower, and Oklo to provide up to 6.6 gigawatts of power for AI data centers by 2035. The same day, the company named Goldman Sachs veteran Dina Powell McCormick as its first-ever president—a role explicitly created to manage the capital partnerships needed to fund $100+ billion in infrastructure spending.
What Survives the Cuts
Not everything in Reality Labs is being cut. Meta will maintain teams working on:
- Quest headsets: The hardware line continues, though with reduced investment
- Enterprise VR applications: Business-to-business use cases with clearer revenue paths
- AI glasses and wearables: The fastest-growing segment gets priority
- Neural interfaces: Long-term research continues on brain-computer interfaces
The cuts are concentrated on the more speculative metaverse components—the virtual worlds, social VR experiences, and consumer-facing platforms that never achieved mass adoption despite billions in investment.
Meta declined to comment on the layoffs.
What to Watch
Wednesday's meeting. Bosworth's "most important meeting of the year" will likely provide more detail on which teams and projects are affected.
Q4 2025 earnings. Meta reports in late January. Watch for updated Reality Labs guidance and any changes to 2026 CapEx projections.
Investor reaction. When Bloomberg first reported the 30% budget cuts in December, Meta shares rose 4%—suggesting Wall Street welcomes the pivot. The layoff confirmation may be already priced in.
AI infrastructure announcements. Powell McCormick's appointment signals imminent capital raises or partnerships. Watch for data center financing deals and additional nuclear energy commitments.
Ask Fintool AI AgentRelated Companies: Meta Platforms-2.41%