Meta cuts 1,500 jobs and closes three VR studios in Bay Area’s first major layoff of 2026

One of Bay Area’s First Tech Layoffs of 2026

Four years ago, Mark Zuckerberg told the world that virtual reality would change everything. He renamed his company Meta and poured billions into building a digital universe where people could work, play, and shop together.

On January 13, 2026, that vision took its biggest hit yet. Meta announced cuts of more than 1,500 jobs from the division responsible for VR headsets and the metaverse, and it shut down three game studios that made some of the best-reviewed titles for its Quest headsets.

The money is now going somewhere else entirely.

Reality Labs Loses 10% of Staff

Meta began cutting more than 1,000 jobs from its Reality Labs division, part of a plan to redirect resources from virtual reality and metaverse products toward AI wearables and phone features.

The cuts affect around 10% of the Reality Labs group’s approximately 15,000 workers.

CTO Andrew Bosworth announced the layoffs in an internal post, and affected employees started receiving notifications on Tuesday morning.

The cuts do not touch Facebook, Instagram, or WhatsApp. They hit only the hardware and metaverse side of the business.

Three VR Game Studios Gone

Meta shut down Twisted Pixel, Sanzaru Games, and Armature Studio as part of the cuts.

These studios made some of the best-reviewed games for Quest headsets. Sanzaru developed Asgard’s Wrath, a critically acclaimed RPG that came free with the Quest 3.

Twisted Pixel released Deadpool VR less than two months before the closure. Armature’s last shipped project was an excellent VR port of Resident Evil 4.

Meta still has five other internal studios, but these closures mark a major pullback from VR game development.

$73 Billion Lost Since 2021

Reality Labs has racked up approximately $73 billion in cumulative losses since 2021. The division has never made a profit.

In Q3 2025 alone, Reality Labs recorded an operating loss of $4.43 billion. Analysts have long worried that Meta was pouring money into a vision that was too far ahead of the market. Zuckerberg is now pulling back.

According to Bloomberg, he has reportedly told executives to cut up to 30% of Reality Labs spending and halt some projects.

Quest Headset Sales Keep Falling

In Q3 2025, global VR headset shipments declined 17% year-over-year. Meta’s Quest sales were down for the second quarter in a row.

According to IDC, Meta shipped only 1.7 million Quest headsets during the first three quarters of 2025, a 16% decline from the year before.

Ray-Ban Smart Glasses Are Selling Fast

While VR stumbles, Meta’s AI glasses are taking off.

Sales of Ray-Ban Meta frames have been so strong that the company is discussing potentially doubling production capacity by the end of 2026.

EssilorLuxottica, which manufactures the glasses, said it would hit its 10 million unit production target well before the original late 2026 deadline.

Meta paused the international expansion of its newest Ray-Ban Display glasses due to unprecedented demand and limited inventory in the United States.

Meta Wants 20 Million Glasses a Year

Meta has suggested increasing annual production capacity to 20 million units or more by the end of 2026. The partners have also discussed going further to establish the capability for producing more than 30 million units if demand justifies it.

The talks reflect a deepening relationship as Meta pivots toward the augmented reality of smart glasses and lowers its commitment to fully immersive VR headsets.

Meta bought about a 3% stake in EssilorLuxottica in July 2025.

Zuckerberg Promised a Billion Users

On October 28, 2021, Zuckerberg announced that Facebook would change its corporate name to Meta. He called the metaverse the next frontier of technology.

In a founder’s letter, he said the company hoped the metaverse would reach a billion people within a decade, host hundreds of billions of dollars in digital commerce, and support jobs for millions of creators.

He said the company would be metaverse-first, not Facebook-first.

Americans Never Bought Into It

According to Google Trends, metaverse searches peaked between late 2021 and early 2022 and have declined since.

A YouGov survey conducted in February 2025 found that only 26% of Americans had used the metaverse in the past 12 months. About three in ten said no brand presence would tempt them into it.

The virtual world Zuckerberg imagined simply never caught on with everyday people.

Meta Has Cut Tens of Thousands

This is not Meta’s first round of major layoffs.

In November 2022, the company implemented the first layoffs in its then-18-year history, cutting more than 11,000 employees.

In March 2023, the company announced another 10,000 layoffs.

In early 2025, Meta cut about 3,600 employees through performance-based terminations.

The company had approximately 86,500 employees at its peak in 2022. It now has around 75,000.

Laid-Off Workers Hit LinkedIn

Within hours of the announcement, LinkedIn was flooded with Open to Work posts from engineers, designers, and managers who had been let go.

Many posts struck a familiar tone: gratitude for the opportunity to work at Meta, pride in the products they helped build, and urgent appeals for leads or referrals.

One content writer from Sanzaru posted that he had been affected by the layoffs, saying it was not how he expected his chapter to end.

Frustration and anger spilled over onto other social media platforms.

The Metaverse Bet Gives Way to AI

Meta spokesperson Tracy Clayton said the company is shifting investment from the metaverse toward wearables and plans to reinvest the savings to support the growth of wearables this year.

Bosworth said Meta will continue to develop the metaverse but will focus more on bringing AI tools to mobile devices rather than intensely developing VR headsets.

The billion-user metaverse Zuckerberg promised in 2021 remains a goal, but it is no longer the company’s primary focus. AI glasses that people actually want to wear are now the bet.

This article was created with AI assistance and human editing.

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