Meta Layoffs Hit Reality Labs: VR and AR Teams Face Restructuring

In a significant move that has sent ripples through the tech industry, Meta Platforms Inc. has laid off over 100 employees in its Reality Labs division, the unit responsible for developing virtual reality (VR) and augmented reality (AR) technologies. The layoffs, which primarily impacted teams at Oculus Studios and the Supernatural VR fitness app, were confirmed by Meta in late April 2025. This restructuring reflects the company’s ongoing efforts to streamline operations amid substantial financial losses and a shifting focus toward artificial intelligence (AI) and wearable technologies like Ray-Ban smart glasses.

A Strategic Pivot for Reality Labs

Meta’s Reality Labs division, once the cornerstone of CEO Mark Zuckerberg’s ambitious vision for the metaverse, has been under scrutiny for its staggering financial losses. Since 2020, the division has reported losses exceeding $60 billion, with a recent first-quarter loss of $4.2 billion in 2025 alone. Despite these setbacks, Reality Labs remains a key player in Meta’s portfolio, overseeing projects like the Quest VR headsets, Horizon Worlds, and Ray-Ban Meta smart glasses.

The recent layoffs, affecting teams responsible for VR gaming and fitness apps, signal a strategic pivot. Meta spokesperson Tracy Clayton stated that the changes aim to “help Studios work more efficiently on future mixed reality experiences for our growing audience, while still delivering great content for people today.” This restructuring follows a broader trend within Meta, which saw the division reorganized earlier this year to integrate more closely with the company’s core business, particularly its AI initiatives. Business Insider

Impact on Oculus Studios and Supernatural

The layoffs have hit Oculus Studios, Meta’s in-house game development arm for Quest headsets, particularly hard. Teams working on popular VR titles like Supernatural and Asgard’s Wrath were affected, with Bloomberg reporting that over 100 employees were let go. Supernatural, a VR fitness app acquired by Meta in 2023 for $400 million, announced a reduction in its weekly workout releases due to the smaller team size. In a heartfelt post on its official Facebook group, the Supernatural team expressed sadness over the departure of “incredibly talented team members” who were instrumental in shaping the app’s success.

These cuts come at a time when Meta is reevaluating its VR strategy. While the Quest headsets remain a flagship product, sales have slumped, with Reality Labs generating only $412 million in revenue in Q1 2025, falling short of Wall Street’s $493 million forecast. The division’s struggles have raised questions about the long-term viability of Meta’s metaverse ambitions, once heralded as the future of computing. The Verge

Meta’s Financial Challenges and Industry Context

Meta’s Reality Labs has been a financial albatross, losing over $1 billion monthly for nearly two years. The division’s high costs stem from heavy investments in VR and AR hardware, software, and content development. Despite these losses, Zuckerberg has remained committed to the metaverse, describing 2025 as a “pivotal year” for the technology. However, the recent layoffs suggest a more cautious approach, with Meta potentially scaling back on less profitable ventures like Horizon Worlds, its social VR platform.

The layoffs also reflect broader trends in the tech industry, where companies like Microsoft, Google, and Intel have faced similar challenges. In February 2025, Meta cut approximately 3,600 employees—about 5% of its global workforce—in what it described as “performance-based” layoffs. The latest round of cuts in Reality Labs indicates that the company is doubling down on efficiency, even as it continues to invest in mixed reality and wearable technologies. CNBC

Employee Experiences and Industry Reactions

The human cost of these layoffs has been significant. Affected employees, many of whom were invited to apply for other roles within Meta, have expressed mixed emotions. One former Reality Labs employee, previously a high performer, described a sense of relief at leaving a high-pressure environment but voiced concerns about the stigma of being labeled a “low performer.” Another employee, who joined Reality Labs in 2023, noted a stark change in workplace dynamics, highlighting the challenges of navigating Meta’s evolving priorities.

Industry analysts have interpreted the layoffs as a sign that Meta is shifting its focus toward more commercially viable products, such as its Ray-Ban smart glasses, which have seen stronger-than-expected sales. Mario Ramić, CEO of Takeaway Reality, suggested that the layoffs reflect a strategic pivot toward lightweight AR glasses, which could appeal to a broader consumer base than VR headsets. This shift aligns with Meta’s growing emphasis on AI, which Zuckerberg highlighted as a priority during the company’s Q1 2025 earnings call.

What’s Next for Meta and Reality Labs?

As Meta navigates this restructuring, questions remain about the future of its VR and AR initiatives. The departure of Reality Labs COO Dan Reed in early May 2025, after 11 years with the company, underscores the division’s challenges. Reed’s exit followed a major reorganization that integrated Reality Labs more closely with Meta’s core business, signaling a move away from the standalone metaverse-focused structure established in 2021.

Despite the layoffs, Meta insists it remains committed to mixed reality. The company continues to invest in fitness and gaming experiences for Quest users, with plans to enhance Supernatural and other VR offerings. However, with mounting losses and declining Quest sales, Meta may need to redefine its approach to achieve profitability in Reality Labs.

The tech giant faces a delicate balancing act: maintaining innovation while addressing financial realities. As Meta refocuses on AI and wearables, the metaverse—once Zuckerberg’s flagship vision—may take a backseat. For now, the layoffs serve as a reminder of the challenges facing the immersive technology sector, as companies grapple with the high costs and uncertain returns of VR and AR development.

The tech industry will be watching closely to see how Meta’s restructuring plays out. Will the company double down on its metaverse dreams, or will it pivot entirely toward AI and wearables? Only time will tell, but for the affected employees and the broader VR community, these changes mark a critical turning point.

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