Meta shifts VR strategy amid ongoing Reality Labs losses

On Wednesday, Meta’s earnings report showed that Reality Labs (Meta’s VR/AR unit) lost some $19.1 billion in 2025. The division’s heavy financial losses have prompted significant cost-cutting measures. Earlier this month, Meta laid off 10% of the staff for Reality Labs, reportedly cutting as many as 1,000 employees, preceding the disclosure of the unit’s multi-billion dollar losses.

The financial comparison highlights the division’s growing deficit:

• 2025 fiscal year loss: some $19.1 billion
• 2024 fiscal year loss: around $17.7 billion

In response to these ongoing losses, Meta is shifting its strategic focus. During the earnings call on Wednesday, Mark Zuckerberg, CEO of Meta, outlined a pivot toward other hardware categories. “For Reality Labs, we are directing most of our investment towards glasses and wearables going forward, while focusing on making Horizon a massive success on Mobile and making VR a profitable ecosystem over the coming years,” Zuckerberg said.

This shift comes alongside operational contractions. Last week, CNBC reported that Meta plans to shutter a number of its VR studios, which serves as another sign that the company’s interest in virtual reality is waning. Additionally, the company recently announced that it is retiring its standalone Workrooms app (Meta’s VR meeting app), which the company had pitched to office workers as a virtual reality space that could be used to hold meetings. Meanwhile, the company is focusing on making Horizon (Meta’s VR platform) a success on mobile.

These annual losses stood against the revenue the unit generated. Throughout 2025, Reality Labs generated some $2.2 billion in sales, which included $955 million in sales during the fourth quarter. However, the high cost of the division remains clear when comparing quarterly performance: the unit posted a $6.2 billion loss in the fourth quarter of 2025 alone, compared to the $955 million generated in sales during the same period.

The ongoing losses come nearly half a decade after Meta announced a pivot toward the metaverse in 2021. As the VR business continues to lose money, it remains unclear what will turn the business around. Despite the continued financial drain, Zuckerberg noted that Reality Labs losses in 2026 are expected to be similar to 2025, though he anticipates this will “likely be the peak, as we start to gradually reduce our losses going forward.”

Why it matters

Meta’s continued investment in Reality Labs, despite significant financial losses and a strategic pivot toward wearables, highlights the ongoing tension between the company’s long-term metaverse ambitions and its current financial performance.