Meta Restructures Reality Labs: VR Studios Cut as Focus Shifts to AI

Image Credit: Dima Solomin | Splash

Meta Platforms is cutting roles in its Reality Labs division, the business unit responsible for the company’s virtual reality hardware, metaverse software and related content. The move comes as Meta increases investment in artificial intelligence infrastructure and positions wearables as a higher priority area.

Cutting More Than 1,000 Roles

On 12 January 2026, Reuters reported that Meta planned to cut around 10 percent of Reality Labs staff, citing a New York Times report. Reality Labs has about 15,000 employees, so the reduction implies more than 1,000 roles could be affected. Reuters said the cuts were expected to be announced as soon as the following day and were expected to fall mainly on teams working on virtual reality headsets and related social experiences.

Separately, Meta’s Chief Technology Officer Andrew Bosworth, who oversees Reality Labs, scheduled a mandatory in person staff meeting that Reuters described as significant, according to an internal memo referenced in reporting.

Moving from Metaverse to Wearables

While Reuters reported Meta declined to comment on the cuts at the time, subsequent coverage reported Meta confirmed a strategic shift in spending priorities. The Verge quoted Meta spokesperson Tracy Clayton saying the company had been shifting some investment from the metaverse toward wearables and intended to reinvest savings to support wearables growth.

This framing matters because Reality Labs sits at the intersection of two expensive bets: immersive computing and AI powered consumer devices. In practice, the latest steps suggest Meta is tightening the scope of Reality Labs work that is not directly aligned with near term product strategy.

Layoffs Happening at Camouflaj

Reporting in the days after the Reuters story indicated the cuts are not limited to back office reductions.

The Verge reported that Meta was shutting down three virtual reality game studios: Twisted Pixel Games, Sanzaru Games, and Armature Studio. It also reported the team behind the Supernatural virtual reality fitness app would stop developing new content while continuing support for the existing product.

Additional reporting also indicated the impact extended to other studios. GeekWire reported layoffs at Camouflaj, a studio associated with a recent Batman virtual reality title.

Taken together, the reported studio closures and product slowdowns suggest a more selective approach to funding virtual reality content pipelines, particularly where the work does not clearly support Meta’s next phase of device strategy.

Meta Horizon Workrooms Will Be Closed

In a separate but related development, Meta confirmed it is shutting down parts of its work focused virtual reality offering.

Meta’s Quest Help pages state that Meta Horizon Workrooms will be discontinued on 16 February 2026, and that associated Workrooms data will be deleted.

Meta’s work help centre also states it is stopping sales of Meta Horizon managed services and commercial Meta Quest offerings effective 20 February 2026, with support continuing until 4 January 2030.

The Verge and Business Insider both linked these enterprise product changes to the broader Reality Labs restructuring, reinforcing that the shift is not only about games and consumer software, but also about how Meta positions virtual reality in workplace use cases.

Resulting from a Loss of USD 17B

Reality Labs has been a persistent drag on profitability in Meta’s segment reporting.

Meta’s 2024 annual report shows Reality Labs revenue of USD 2.146 billion in 2024, with an operating loss of USD 17.729 billion. The same filing shows the loss widened from 2023, driven largely by higher employee compensation and infrastructure costs.

That scale matters because AI infrastructure investment is also rising across big tech, and Meta has been explicit that it wants to build and control more of the compute and data centre stack that powers modern AI models.

Part of the “Superintelligence” Move

On the same day Reuters reported the Reality Labs cuts, Reuters also reported Meta launched a new initiative called Meta Compute, aimed at building and managing AI infrastructure and data centre supplier partnerships. Reuters reported it will be co led by Santosh Janardhan and Daniel Gross, and characterised the initiative as part of Meta’s pursuit of “superintelligence”.

Mark Zuckerberg also posted publicly that Meta plans to build tens of gigawatts of compute capacity this decade and hundreds of gigawatts or more over time, positioning infrastructure as a strategic advantage.

In the Reality Labs layoff report, Reuters additionally noted Meta was seeking to rebuild momentum in AI following criticism of its Llama 4 model. Whether or not that was a driver of the Reality Labs cuts, it underlines the point that AI performance and delivery speed are now central to Meta’s competitive posture.

Awaiting the January 28 Announcement

For employees, the near term effect is straightforward: fewer roles across Reality Labs, with a visible reduction in internal studios and some product development streams.

For Meta’s product portfolio, the signal is a sharper prioritisation of devices and software that fit the current strategy, particularly wearables that can act as AI delivery surfaces. Reuters noted Reality Labs also develops Quest mixed reality headsets and Ray Ban Meta smart glasses, and it is that wearables layer that Meta has been highlighting as a stronger growth path.

For the broader virtual reality ecosystem, studio closures and reduced content investment can have second order effects, because exclusive content and first party funding have been a major driver of platform differentiation. The reported shutdown of multiple studios indicates Meta is less willing to subsidise that approach at prior levels.

For enterprise users, the scheduled shutdown of Workrooms and changes to managed services create practical planning work. Meta’s help centre guidance includes dates and support windows, which businesses will need to factor into device lifecycle and collaboration tool decisions.

Meta has scheduled its fourth quarter and full year 2025 results for release on 28 January 2026. The earnings materials are likely to be the next formal checkpoint for Reality Labs spending, AI capital expenditure signals, and any additional commentary on restructuring.

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