Mark Zuckerberg's $70 billion metaverse experiment is entering a new phase—and it looks a lot like retreat. Meta Platforms began notifying more than 1,000 employees in its Reality Labs division on Tuesday that their positions are being eliminated, part of a strategic pivot that prioritizes artificial intelligence and smart wearables over the virtual reality future Zuckerberg once championed.

The cuts, representing approximately 10% of Reality Labs' 15,000-person workforce, fall most heavily on teams developing virtual reality hardware and the Horizon Worlds metaverse social platform. Meanwhile, teams working on AI-powered wearables like the Ray-Ban Meta smart glasses are expected to be largely spared.

The End of an Era

When Facebook rebranded as Meta in October 2021, Zuckerberg declared that the metaverse—immersive digital worlds accessed through VR headsets—would be the next major computing platform. The company committed tens of billions of dollars to Reality Labs, hired thousands of engineers, and staked its corporate identity on the bet.

Four years later, the results have been sobering:

  • Massive Losses: Reality Labs has accumulated more than $70 billion in operating losses since its creation in 2020. In the most recent quarter alone, the division lost $4.4 billion on just $470 million in revenue.
  • Tepid Consumer Adoption: The Quest VR headset family has sold reasonably well by VR standards but remains a niche product. Most headsets gather dust after initial enthusiasm fades.
  • Horizon Struggles: Meta's metaverse social platform has failed to attract meaningful user engagement, with reported active user numbers far below initial targets.
  • Competition Falters Too: Apple's Vision Pro, launched with great fanfare, has similarly struggled to find a mainstream audience, validating skeptics who questioned whether VR was ready for mass adoption.

"The metaverse vision hasn't changed, but the timeline has. We're making adjustments to ensure we're investing in the areas with the greatest near-term impact while maintaining our long-term research efforts."

— Meta spokesperson

The AI Pivot

As the metaverse dream fades, Meta has found a new obsession: artificial intelligence. The company's AI investments have delivered tangible results—improved ad targeting, better content recommendations, and the well-received Meta AI assistant—that justify continued spending.

Within Reality Labs, the pivot manifests as a shift from VR headsets to AI-powered wearables. The Ray-Ban Meta smart glasses, launched in partnership with EyeSafe, have emerged as an unexpected bright spot. The glasses incorporate cameras, speakers, and an AI assistant that can identify objects, answer questions, and facilitate hands-free communication.

Meta executives reportedly see smart glasses as a more viable path to mainstream adoption than VR headsets. The glasses look normal, don't isolate wearers from their environment, and leverage AI capabilities that feel genuinely useful rather than gimmicky.

Budget Cuts Ahead

The layoffs are part of broader cost containment at Reality Labs. Reports indicate Meta executives are considering budget cuts of up to 30% for 2026, which would significantly slow development of new VR hardware and metaverse features.

Teams focused on the Quest line of headsets and Horizon Worlds are expected to bear the brunt of reductions. Augmented reality research—still years from commercialization—may be scaled back but not eliminated, as Meta views AR glasses as an eventual successor to smartphones.

What It Means for Employees

For the 1,000-plus workers losing their jobs, the cuts represent the latest wave in a difficult period for tech employment. Meta eliminated approximately 21,000 positions during 2022-2023, and Reality Labs specifically has faced multiple rounds of reductions.

The affected employees are being notified starting Tuesday, with severance packages expected to follow Meta's established practices. The company has historically offered relatively generous separation terms, including months of salary continuation and extended healthcare coverage.

Implications for the Industry

Meta's Reality Labs retreat has implications beyond Menlo Park:

  • VR Ecosystem: With Meta pulling back, the VR developer ecosystem loses its most committed major platform holder. Game studios and app developers may reconsider investments in VR content.
  • Apple: The Vision Pro's struggles become harder to dismiss as a Meta-specific failure when both major VR players are retrenching.
  • AI Hardware: The shift toward AI wearables could accelerate competition in smart glasses and similar categories, benefiting companies with strong AI capabilities.

The Long View

Zuckerberg has repeatedly emphasized that the metaverse is a decade-long bet, and nothing in Tuesday's announcements suggests Meta is abandoning VR entirely. The company continues to develop next-generation headsets and maintains significant research efforts in AR technology.

But the pace has clearly slowed, the scope has narrowed, and the timeline has stretched. The metaverse may still arrive someday—just not as soon, or in quite the form, that Zuckerberg envisioned when he staked his company's identity on the bet.

For now, the future belongs to AI. And Meta, like the rest of Silicon Valley, is racing to make sure it isn't left behind.