Meta fires VR employees, highlighting Zuckerberg’s focus on AI

Mark Zuckerberg changed his Facebook name metais making a major course correction, reflecting his view that the future of work, play and socializing is becoming virtual.

This week, Meta began laying off virtual reality employees within its Reality Labs division and closing a number of studios that were developing VR titles, according to people familiar with the matter who requested anonymity to protect confidentiality. CNBC confirmed a New York Times report that the layoffs, which amount to more than 1,000 jobs, will affect about 10% of the company’s hardware division, which makes Quest VR headsets, and the Horizon Worlds virtual social network.

Meta’s chief technology officer, Andrew Bosworth, is scheduled to hold an all-hands meeting with Reality Labs on Wednesday, some people said.

Meta is scaling back its Metaverse ambitions as it continues to ramp up investments in Zuckerberg’s recent obsession with artificial intelligence, a technology that consumes Silicon Valley and the broader industry. Mr. Zuckerberg has paid a lot of money for AI talent, most notably spending $14.3 billion to hire Scale AI founder Alexander Wang, who is currently leading the company’s AI strategy, and other engineers and researchers at the startup.

In October, Vishal Shah, who had led the company’s Metaverse efforts for four years, was named vice president of AI products. That same month, Mehta raised its 2025 capital spending range from $70 billion to $72 billion and said dollar growth in 2026 would be “significantly larger.”

The studios closing as part of the latest changes include Armature Studio, Twisted Pixel, and Sanzaru, as well as a technology division called Oculus Studios Central Technology, people told CNBC. Other studios are also seeing layoffs, including Ouro Interactive, which Meta debuted in 2023 to build first-party content for Horizon Worlds.

Supernatural, the VR fitness app that Meta Inc. bought for $400 million in 2023, has entered maintenance mode, meaning it will be run by a skeleton staff and will no longer receive new content, people familiar with the matter said.

Meta laid the groundwork for this week’s announcement in December, when the company announced it would shift resources within Reality Labs’ budget from its VR efforts to AI glasses and wearable devices.

“This is part of that effort, and we plan to reinvest those savings to support growth in wearables this year,” a Meta spokesperson said, without commenting specifically on the job cuts.

While Meta’s VR project never took off, the company has found greater success, particularly in the AI-powered wearables space. Essilor Lux Otica To make Ray-Ban Meta smart glasses.

In September, the companies announced Meta Ray-Ban display glasses. It costs $799 and includes a single built-in display that shows users small messages and photo previews. Meta announced last week that it would delay the global debut of its display glass, citing “limited” inventory amid “unprecedented” demand in the United States.

Luxottica Chief Financial Officer Stefano Grassi said in October that the company would be able to reach its originally planned production capacity of 10 million glasses by the end of 2026 sooner than expected.

Despite the downsizing, Meta hasn’t abandoned VR.

The company is recruiting developers to develop the game. robloxAccording to sources, a virtual world gaming platform popular with children was developed to build the Horizon Worlds experience. Roblox says it has more than 150 million daily users, but Horizon, which Zuckerberg introduced during the company’s name change, has never attracted more than a few hundred thousand monthly active users.

Taking cues from the likes of Roblox and Minecraft, which Microsoft acquired in 2014, Horizon Worlds could serve as a funnel for Meta to attract younger audiences to its service.

Mr. Bosworth last year told the company to turn Horizon World into a hit smartphone app after starting testing a mobile version in 2023, people familiar with the matter told CNBC. Meta transferred employees from other Reality Labs divisions to the Horizon Worlds team in 2025, former employees said.

CCS Insight analyst Ben Hutton, who covers connected devices, said declining performance in VR headsets and continued growth in mobile are forcing it into Meta’s hands.

“Mobile gaming has become so popular over the last five years or so that it makes sense that the meta would shift to mobile,” Hutton said.

Ouro is one of the studios working on mobile content for Horizon Worlds, officials said.

Meta’s decision to scale back its VR efforts comes 12 years after Facebook entered the market with its $2 billion acquisition of Oculus VR. Since late 2020, Meta’s Reality Labs division has recorded cumulative losses of more than $70 billion. In its most recent quarterly results released in October, Meta said Reality Labs posted a loss of $4.4 billion on revenue of $470 million.

Meanwhile, the company is working on a decentralized AI strategy in an effort to keep pace with OpenAI and Google, whose large-scale language models and AI capabilities are surging in popularity. CNBC reported last month that Meta plans to release its next Frontier model, codenamed “Avocado,” in the first quarter of this year.

Meta’s stock price has fallen significantly. of the alphabet This trend has been going on since the beginning of 2026, with stock prices down more than 4% since the calendar change.

Horizon Worlds struggled from the start.

In August 2022, 10 months after Zuckerberg announced his plans to go all-in on the Metaverse, he posted a photo to his Facebook profile of his avatar standing in front of an animated version of the Eiffel Tower and Spain’s Sagrada Familia cathedral. The photo was criticized on social media for its poor graphic quality. A few days later, Zuckerberg posted a new image of an improved version of his avatar, promising users that “major updates to Horizon and avatar graphics” were coming soon.

But within Horizon World, the photo debacle was a defining moment, according to people familiar with the matter. Mr. Zuckerberg held a meeting with the VR avatar team and asked for improvements, one of the people said.

Multiple VR developers told CNBC that their observations indicate that usage of Horizon Worlds remains low, adding that the company does not share specific statistics. Developers said they were frustrated by the lack of accurate information that would help them create more engaging games and experiences.

Rather, Meta has refocused on a more Roblox-like experience and last year began directing existing third-party Horizon Worlds developers to build games that are kid-friendly and simple.

Meta developer advocate Deepak Nair gathered an audience in Berlin in August to discuss this strategy, encouraging them to emulate Roblox and Minecraft and build games that let kids create stories they can share with their friends. Nair said a key issue for developers is identifying the right tier.

“Typically 13 to 24 years old, right?” Nile said. “And in other ecosystems, it’s even younger.”

In February, Meta launched a $50 million Creator Fund aimed at encouraging developers to create more in-game experiences within Horizon Worlds, with a focus on mobile. Officials say the company plans to make Horizon Worlds seamlessly and easily accessible to Facebook and Instagram users.

–CNBC’s Kif Leswing contributed to this report.

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