Meta Platforms Inc. (META) is about to make a dramatic statement about its priorities. The company is preparing to cut at least 10% of jobs in its Reality Labs division—the unit responsible for virtual reality headsets and the metaverse—as it doubles down on artificial intelligence instead.
With Reality Labs currently employing around 15,000 people, we're talking about roughly 1,500 jobs on the chopping block. According to The New York Times, the announcement could come as early as Tuesday. Meta hasn't confirmed the report yet.
Here's what's happening with the money: Meta plans to redirect funding away from virtual reality projects and pump it into wearables, specifically smart glasses and wrist-based devices. It's a clear signal that the company sees more immediate potential in products you can wear throughout your day than in immersive VR worlds.
The "Most Important" Meeting of the Year
Adding to the intrigue, Meta's Chief Technology Officer Andrew Bosworth has scheduled a meeting for Wednesday and urged staff to show up in person. He's calling it the "most important" meeting of the year, though no one's saying exactly what's on the agenda. Given the timing, you can bet Reality Labs employees are feeling anxious.
A Pattern of Cuts and Retreats
This isn't Meta's first rodeo with Reality Labs layoffs. Back in April, the company cut an unspecified number of jobs from the same division, hitting the Oculus Studios unit particularly hard. That's the group that develops VR and AR games and content for Meta's Quest headsets.
Then in December, Meta's stock actually jumped after the company announced job cuts and budget reductions of around 30% for its metaverse operations. Reports suggested executives were eyeing up to 30% budget cuts for 2026 in the metaverse division, which includes Horizon Worlds and the Quest VR unit. This was notable because CEO Mark Zuckerberg had literally renamed Facebook to Meta and positioned the metaverse as the company's entire future just a few years ago.
The AI division hasn't been immune either. In October, Meta cut about 600 jobs from its AI unit as part of restructuring efforts aimed at streamlining operations. That memo came from Chief AI Officer Alexandr Wang, who joined after Meta made a $14.3 billion investment in Scale AI.
The Competitive Pressure Cooker
What's driving all these changes? Competition. Meta is scrambling to keep pace with OpenAI, Alphabet's Google (GOOG) (GOOGL), and Microsoft Corporation (MSFT) in the AI arms race. Every dollar spent on virtual reality headsets is a dollar not spent on the next generation of AI models.
The market seems to approve of Meta's strategic shift. Despite these cuts and restructuring moves, the company has performed reasonably well. Over the past year, Meta stock climbed 5.53%. On Monday, shares fell 1.70% to close at $641.97.
What we're witnessing is a company in transition, backing away from Zuckerberg's grand metaverse vision and pivoting toward the technology that investors and competitors alike believe will define the next decade. Reality Labs isn't disappearing entirely, but it's clearly no longer the crown jewel it once was.
