Meta Plans Substantial Cuts to Reality Labs Amid Shift in Investment

Meta, the tech giant, is reportedly considering significant reductions in its Reality Labs division, which oversees the development of the Quest VR headset and the Horizon Worlds platform. According to sources, the company is eyeing budget cuts of up to 30% in 2026, with potential layoffs as early as January. The decision to cut costs is driven by the lack of substantial competition in the metaverse space and the division's significant financial losses, which have been a concern for investors and analysts. Despite the cuts, Meta is not abandoning its metaverse plans but is instead reallocating resources to its augmented reality glasses, developed in partnership with Ray-Ban, and AI-powered wearables. A Meta spokesperson confirmed the shift in investment, stating that the company is 'shifting some of our investment from Metaverse towards AI glasses and wearables, given the momentum there.' The news has been well-received by investors, with the company's stock price increasing by 5.5% following the announcement. The Reality Labs division has struggled financially, with a reported loss of $4.97 billion in 2025, despite generating $1.08 billion in revenue from its Meta Quest hardware. The company has lost over $70 billion since its pivot to the metaverse in 2021. The latest cuts are part of a larger effort by Meta to reduce costs and refocus its investments, following a series of significant job losses in recent years, including the layoff of 5% of its workforce in January and the retirement of 5,000 open roles in 2023.