Meta company announced on Tuesday (January 13th) that it would be laying off over 1,000 employees, primarily targeting its Reality Labs department. The purpose of this move is to shift resources from virtual reality and metaverse products towards the research and development of artificial intelligence wearable devices and smartphone functionalities. This marks the first wave of large-scale layoffs in the Bay Area tech industry in 2026.
According to CNBC, Meta’s Chief Technology Officer Andrew Bosworth disclosed this decision in an internal post. The employees affected by the layoffs in the Reality Labs department were mainly involved in projects related to the metaverse, the development of virtual reality headset Quest, and Ray-Ban’s Meta smart glasses.
Meta spokesperson Tracy Clayton later confirmed the news to multiple media outlets. Clayton stated in a press release that the layoffs do not involve departments related to Facebook, Instagram, or WhatsApp: “We indicated last month that we were shifting some of our investments in the metaverse towards wearable devices, and these layoffs are part of that strategy. We plan to reinvest the saved funds to drive growth in wearable devices this year.”
Meta has been planning for years to reduce its investments in the metaverse. When Mark Zuckerberg renamed the company to Meta in October 2021, he envisioned the metaverse as an “embodied internet” where people could collaborate, learn, have fun, and shop together. He aimed to reach 1 billion users in the metaverse within the next ten years, facilitate billions of dollars in digital commerce, and create job opportunities for millions of creators and developers.
However, the hype surrounding this concept quickly turned to ridicule. Meta faced criticism for its legless avatars and the failure of Horizon Worlds to gain popularity.
Zuckerberg’s ambitious goals also burdened Meta’s finances. In 2024, the Reality Labs division accounted for 21% of total expenses, resulting in a loss of over $17.7 billion. Since the beginning of 2021, this division has accumulated losses of $71 billion.
Clearly, Zuckerberg is shifting investments towards wearable devices, banking on the success of Quest headsets (well-reviewed and more affordable than Apple’s Vision Pro headset) and glasses embedded with artificial intelligence.
According to Bloomberg, due to high demand, Meta is considering doubling the production of their new AI glasses. Zuckerberg envisions that in the future, individuals not wearing high-tech glasses will be at a “cognitive disadvantage.”
Reports indicate that the recent layoffs at Meta impact about 10% of the employees in the Reality Labs division, including the hardware department and the Horizon Worlds team. Several studios will be shutting down, such as Armature Studio, Twisted Pixel, Sanzaru, Oculus Studios Central Technology, Ouro Interactive, among others. The VR fitness app Supernatural, acquired for $400 million in 2023, will transition to maintenance mode with only a minimal team running it and no more content updates.
Despite reducing investments in virtual reality, Meta has not completely abandoned the field. They are now attracting developers who can create games for Roblox (a popular virtual world gaming platform for children) to build experiences for Horizon Worlds. Roblox has over 150 million daily active users, while Horizon Worlds’ monthly active users have never exceeded tens of thousands. Horizon Worlds aims to draw from the success of platforms like Roblox and Minecraft to attract a younger audience.
Last year, Bosworth directed the transformation of Horizon Worlds into a smartphone application and transferred staff from other departments to support the initiative.
Meta is also ramping up investments in artificial intelligence (AI). They hired Alexandr Wang, the founder of Scale AI, for $14.3 billion last year to lead their AI strategy, and have raised their capital expenditure to $70-72 billion in 2025.
A Meta spokesperson stated that this adjustment aims to redirect resources towards AI glasses and wearable devices. The Ray-Ban Meta smart glasses, developed in collaboration with EssilorLuxottica, have performed well. The release of the glasses with built-in displays, delayed due to unprecedented demand in the domestic market, has been highly anticipated for global launch.
Meta’s stock performance last year significantly lagged behind Alphabet’s and has continued to fall behind the Nasdaq in early 2026, with a decline of over 4% since the beginning of the year.