Meta’s Reality Labs cuts sparked fears of a ‘VR winter’

Meta‘s deprioritizing virtual reality in favor of artificial intelligence and Internet-connected smart glasses has chilled the industry, leading to concerns about its future.

“I can see how it feels like a VR winter,” said Jessica Young, an independent VR content creator specializing in Horizon Worlds, Meta’s virtual social network.

The social media giant last week laid off 10% of employees who work within its Reality Labs unit, with the cuts centering on VR-related initiatives like the Quest VR headsets, CNBC reported. Teams working on Horizon Worlds were hit hard and some in-house studios were shuttered. Approximately 1,000 jobs were cut, CNBC reported.

The move was part of the company’s effort to redirect Reality Labs investments from VR to AI and wearable devices like the Ray-Ban Meta smart glasses that are co-produced with EssilorLuxottica, a spokesperson for the social media company said in a statement last week. Meta declined to comment further beyond its previous statement.

Meta’s reduced investment in VR is notable considering how much the company has helped grow the industry since its $2 billion acquisition of Oculus in 2014. The company became synonymous with VR when CEO Mark Zuckerberg changed its name from Facebook to Meta, representing the founder’s obsession with a future of digital worlds referred to as the metaverse. Since late 2020, Meta’s Reality Labs division has logged over $70 billion in cumulative losses.

Zuckerberg’s sudden reversal has some VR developers worried about their future prospects. While they said they don’t see Meta killing its VR efforts, a major shift appears to be underway.

Meta traditionally announces new Quest VR headsets during its annual Connect conference in the fall, but in 2025, the company skimped on VR hardware. Instead, Meta introduced its $799 Meta Ray-Ban Display glasses that contain a single, built-in digital screen.

“If Meta’s not putting out a new headset for another year or two, it’s going to feel stale,” Young said. “It already kind of does.”

Since the layoffs, Meta tech chief Andrew Bosworth has been vocal that the social media giant is not abandoning VR.

“We’re still continuing to invest heavily in this space, but obviously, VR is growing less quickly than we hoped,” Bosworth told tech newsletter Sources. “And so you want to make sure that your investment is right-sized.”

Bosworth this week also circulated a post by Oculus co-founder Palmer Luckey, who on Sunday wrote on X that Meta still employs the “largest team working on VR by about an order of magnitude.”

Although Luckey said that he feels “really bad for the people impacted” by the layoffs, the Reality Labs changes represent “a good thing thing for the long-term health of the industry, especially the ongoing incentives.”

Market research firm IDC said in a December report that a major transition is occurring in the so-called Extended Reality, or XR, device segment. This category includes VR and so-called mixed-reality headsets that allow users to switch between virtual environments and see their surroundings outside the helmet. The category also counts AI-powered smart glasses and more powerful versions with digital displays.

IDC projects the XR device category to have grown 41.6% year-over-year to 14.5 million units shipped for 2025. But that growth has nothing to do with VR and mixed-reality headsets — those shipments are expected to drop 42.8% to 3.9 million in 2025. The rest of this XR category, which includes AI glasses with and without displays, is projected to grow 211.2% year-over-year to 10.6 million units shipped for 2025.

Jitesh Ubrani, a research manager for market analyst firm IDC, characterized the VR headset market as niche and appealing to only a small segment of video gamers. Average consumers seem uninterested in wearing “big, bulky headsets” for lengthy VR sessions like much of the tech industry hoped for roughly a decade ago, he said.

“The market has spoken,” Ubrani said. “There are certain niche audiences that will continue to use these headsets, but it’s not going to be broadly appealing.”

Andrew Eiche, the CEO of the Google-owned VR gaming studio Owlchemy Labs, said…