Meta Scales Back VR Ambitions as Zuckerberg’s Focus Shifts Decisively Toward AI

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Just over four years after Facebook rebranded itself as Meta to signal a bold bet on the metaverse, the company is now making a significant strategic retreat from its virtual reality (VR) ambitions. Meta has begun laying off employees working on VR projects and shutting down multiple studios within its Reality Labs division, underscoring CEO Mark Zuckerberg’s dramatic pivot toward artificial intelligence as the company’s primary growth engine.

According to reports confirmed by CNBC, Meta is cutting more than 1,000 jobs—around 10% of its Reality Labs hardware division. The layoffs affect teams working on Quest VR headsets and Horizon Worlds, Meta’s flagship virtual social platform. Several VR-focused studios, including Armature Studio, Twisted Pixel, Sanzaru, and Oculus Studios Central Technology, are being closed, while others are seeing staff reductions. Even Supernatural, a VR fitness app acquired for $400 million in 2023, has been moved into maintenance mode with no new content planned.

The End of the Metaverse Dream?

When Zuckerberg announced Facebook’s rebranding to Meta in 2021, he described a future where people would work, socialize, and play in immersive virtual environments. Billions of dollars were poured into Reality Labs to turn that vision into reality. However, consumer adoption never matched expectations. VR headsets remained niche products, and Horizon Worlds struggled to attract sustained engagement, rarely exceeding a few hundred thousand monthly active users.

Since late 2020, Reality Labs has accumulated more than $70 billion in losses. In its most recent earnings report, the division posted a $4.4 billion quarterly loss on just $470 million in revenue—figures that have increasingly alarmed investors.

These financial pressures, combined with the explosive rise of generative AI, appear to have forced Meta’s hand. Rather than continue betting heavily on a technology that has yet to achieve mass adoption, the company is reallocating resources toward areas showing clearer commercial promise.

Zuckerberg’s AI Obsession Takes Center Stage

Artificial intelligence has become Zuckerberg’s dominant focus, mirroring a broader shift across Silicon Valley. Meta has spent aggressively to attract top AI talent, most notably paying $14.3 billion in June to bring in Scale AI founder Alexandr Wang, who now leads the company’s AI strategy.

Organizational changes reflect this pivot. In October, Vishal Shah, who previously led Meta’s metaverse initiatives, was appointed vice president of AI products. That same month, Meta raised its projected 2025 capital expenditures to as much as $72 billion, signaling even heavier investment in AI infrastructure through 2026.

Meta is also racing to keep up with rivals such as OpenAI and Google, whose large language models have gained massive popularity. The company plans to release its next-generation frontier AI model, codenamed “Avocado,” in early 2026 as part of its effort to stay competitive in the AI arms race.

Wearables Over Virtual Worlds

While Meta is scaling back VR, it is not abandoning immersive technology entirely. Instead, the company is redirecting its efforts toward AI-powered wearables—an area where it has seen more tangible success. Meta’s partnership with EssilorLuxottica to produce Ray-Ban Meta smart glasses has gained traction, with strong consumer demand in the U.S.

The recently unveiled Meta Ray-Ban Display glasses, priced at $799, feature a built-in display for notifications and photo previews. Demand has reportedly been so high that Meta delayed the global rollout due to limited inventory. Luxottica executives have said production targets originally set for 2026 may be reached earlier than expected.

Meta has stated that savings from VR layoffs will be reinvested into wearables and AI glasses, suggesting that the company now sees augmented reality and AI-driven hardware as a more realistic bridge between the physical and digital worlds than fully immersive VR.

A Roblox-Inspired Second Chance for Horizon Worlds

Despite downsizing, Meta is not shutting the door on Horizon Worlds. Instead, it is attempting to reinvent the platform by taking cues from massively popular gaming ecosystems such as Roblox and Minecraft. Meta is actively courting developers who build for Roblox—particularly creators of simple, kid-friendly games—to develop mobile experiences for Horizon Worlds.

Roblox boasts more than 150 million daily users, many of them children and teenagers. By contrast, Horizon Worlds has struggled to attract a comparable audience. Meta now hopes that shifting toward mobile access and simplified gameplay can help the platform reach younger users and integrate more seamlessly with Facebook and Instagram.

To support this strategy, Meta launched a $50 million Creator Fund to incentivize developers to build mobile-first experiences. The company also plans to make Horizon Worlds more accessible through its core social apps, reducing friction for new users.

Lessons From a Costly Experiment

Meta’s retreat from VR highlights the risks of betting too early and too heavily on unproven technologies. While Zuckerberg’s metaverse vision was ambitious, the market was not ready to follow at the scale required to justify the investment. Meanwhile, mobile platforms and AI evolved faster and delivered clearer returns.

The shift also reflects investor pressure. Meta’s stock significantly underperformed Alphabet and the Nasdaq last year, and shares have continued to lag in early 2026. Wall Street now appears far more interested in Meta’s AI roadmap than its virtual reality aspirations.

Conclusion

Meta’s VR layoffs and studio closures mark a defining moment in the company’s transformation. What began as an all-in bet on the metaverse has evolved into a more cautious, pragmatic strategy centered on artificial intelligence and wearable technology. While Meta is not entirely abandoning virtual worlds, it is clearly deprioritizing them in favor of AI—where competition is fierce, but the opportunities are immediate and vast.