Meta Reality Labs Layoffs: The $73 Billion Metaverse Dream Hits Reality

It's a massive retreat for a company that staked its entire identity on a virtual future. Meta is reportedly laying off roughly 1,500 employees from its Reality Labs division—about 10% of the unit's staff—and shutting down several VR game studios, according to The Wall Street Journal. The dream of the metaverse, which cost the company an eye-watering $73 billion, is being dismantled in real-time.

Why Meta Reality Labs Layoffs Were Inevitable

The casualties include several high-profile VR studios. CNBC reports that Armature Studio (Resident Evil 4 VR), Twisted Pixel, and Sanzaru are being shuttered. Even Supernatural, the VR fitness app Meta acquired for $400 million in 2023, is entering 'maintenance mode.' The budget for the virtual reality department was reportedly slashed by up to 30% in late 2025, signaling that investors' patience has finally run out.

The metaverse's failure wasn't just financial; it was a product failure. Meta's 'build in the open' model backfired as early versions featured soulless, legless avatars that became the target of internet memes. Meanwhile, consumer demand for VR headsets has been cooling. Global shipments fell by 12% year-over-year in 2024, marking the third consecutive year of declines. Despite holding a 77% market share, Meta was leading in a shrinking room.

Greedy Fees and the AI Pivot

One of the biggest blunders was the 47.5% cut Meta planned to take from digital asset sales—significantly higher than the 30% fees charged by Apple and Google that Zuckerberg so frequently criticized. Developers were understandably reluctant to join a platform that took nearly half their revenue. Now, the company is shifting its focus toward AI and Ray-Ban Meta AR glasses, which have proven much more popular with mainstream consumers.