In January 2026, Meta announced that they are cutting around 1,500 jobs in their Reality Labs division, prompting several self-proclaimed metaverse experts to declare that VR/XR/"the metaverse" is dead.
This unsettled some of our clients and they asked for guidance. This is what we tell them.
It should be noted that this cut is roughly 10% of this division's workforce. More than 13.000 people still work on Meta's XR initiatives: Hardware, Platform ( Horizon), Content, … Meta is still investing a lot of their resources in this field, more than anyone else and still on a similar level compared to recent years. This shows that Meta is still very bullish and was explained by CTO Andrew Bosworth in a recent video, in which he also confirms that they are still working on two new hardware devices and more content.
Instead of relying on how Meta is framing the context of the layoffs, let's take a look at them in more detail. It is worth noting that the majority of those cuts are the content studios - studios that Meta acquired over the last few years. This leads to two questions: Why did they acquire those studios back then and why do they have to reduce the headcounts now?
With Meta's Quest devices dominating the VR hardware market and Meta Horizon becoming the central distribution platform for VR content, the biggest obstacle to VR adoption was the content itself. To address this, Meta invested a lot, ranging from providing free and feature-rich SDKs to funding over 100 VR & mixed reality titles in 2024 alone.
Why they moved from funding external studios towards acquiring them is up for speculation but our guess is that this was the stronger investment case and would allow them to build up exclusive titles for their platform, such as Batman: Arkham Shadow (developed by studio Camouflaj, acquired by Meta Platforms in 2022).
So, given that this strategy is sound on paper, why were the layoffs now necessary? Meta's official answer, in the words of Andrew Bosworth, is that "the investment [Meta] put in is bigger than what the growth of the ecosystem would allow."
The unofficial insight after developing lots of great VR games is that VR players are not as much interested in single player VR experiences as expected by Meta. In addition, given that Meta has such a huge lead in this race, they will likely win this race even when investing less. The race for AI is much more competitive so the urgency is much higher there.
To use a simple analogy here…
Amazon let go of 14.000 people in October last year and another 16.000 people in January this year. That's 20 times as many layoffs than what we are seeing at Meta's Reality Labs within the same time period.
Yet, nobody claimed that "e-commerce is dead" because of that. The statement "VR is dead" is equally absurd, it just looks more plausible at first sight.