Meta's virtual reality ambitions cost the company $19.1 billion last year, a figure that shows just how expensive the company's bet on immersive technology has become. The losses, reported this week as part of the company's quarterly earnings, came alongside layoffs of over 1,000 workers from the Reality Labs division and a blunt acknowledgment from leadership that the financial bleeding will not stop anytime soon.
The numbers are staggering. In the final three months of 2025 alone, Reality Labs lost $6.02 billion while generating only $955 million in revenue. For the full year, the division's losses climbed to $19.1 billion, up from $17.7 billion in 2024. Mark Zuckerberg, Meta's chief executive, told investors on Wednesday that he expects Reality Labs to lose roughly the same amount in 2026.
Background
Meta's push into virtual reality began in earnest after the company rebranded itself from Facebook in 2021. The shift reflected Zuckerberg's conviction that immersive digital worlds would become the next major computing platform, following the rise of personal computers and smartphones. The company spent billions acquiring VR companies, building hardware, and developing software to support what Zuckerberg called the "metaverse."
The reception has been mixed at best. While some early adopters embraced VR gaming and entertainment, the broader public remained skeptical. Meta's metaverse efforts drew mockery online, with critics pointing to low user engagement and high costs. The company's VR headsets, despite technical improvements, failed to achieve mainstream adoption.
Since late 2020, Reality Labs has accumulated losses exceeding $80 billion. That figure includes the $19.1 billion lost in 2025 alone. For context, Meta's entire advertising business—which generates roughly $59 billion in quarterly revenue—funds these losses while the company pursues other bets.
Key Details
The timing of the latest losses coincides with a major shift in Meta's strategy. Earlier this month, the company laid off more than 1,000 Reality Labs employees, roughly 10 percent of the division's workforce. The company also shut down internal VR studios and discontinued Workrooms, a virtual office application that had attracted some enterprise customers.
These moves signal a clear change in direction. Rather than doubling down on the metaverse concept, Meta is now redirecting resources toward artificial intelligence and smart glasses technology. Zuckerberg described the new focus as building "glasses and wearable technology" while attempting to make virtual reality experiences work on mobile devices through a product called Horizon.
"For Reality Labs, we are redirecting the majority of our investments towards glasses and wearable technology in the future, aiming to make Horizon a scalable success on mobile devices and transform VR into a profitable ecosystem in the coming years," Zuckerberg said during the earnings call.
The shift reflects a sobering reality: the virtual reality market is growing far more slowly than Meta's executives anticipated. Andrew Bosworth, Meta's chief technology officer, acknowledged this gap when speaking to media outlets last week, admitting that the market is "growing slower than executives hoped."
Meta's chief financial officer, Susan Li, told investors not to expect a sudden turnaround. She said the company expects Reality Labs' operating losses in 2026 to remain "similar to 2025 levels." This means another year of roughly $19 billion in losses for the division.
The Revenue Problem
The core challenge facing Reality Labs is simple: the division generates very little revenue relative to its costs. Last year, it brought in $2.2 billion across the entire year while spending roughly $21 billion. The gap between what the division earns and what it spends grows wider each quarter.
For comparison, Meta's advertising business generates tens of billions in quarterly revenue. The company's core social media platforms—Facebook, Instagram, and WhatsApp—collectively reach 3.5 billion people daily. Reality Labs, by contrast, serves a niche market of VR enthusiasts and enterprise customers.
What This Means
Meta's willingness to absorb $19 billion in annual losses from Reality Labs reveals the company's confidence in long-term returns from VR and AI technology. However, it also shows the limits of that confidence. By cutting staff and shifting strategy, Meta is essentially admitting that its original metaverse vision was not working.
The pivot toward smart glasses and AI-powered experiences represents a more pragmatic approach. Rather than asking consumers to adopt entirely new computing platforms, Meta is attempting to integrate immersive technology into products people already use. This strategy carries less risk but also less transformative potential.
For Meta's investors, the key question is whether these losses will eventually decrease. Zuckerberg suggested they will, stating that 2026 "is likely to represent the peak, as we progressively diminish our losses moving forward." But his track record on VR timelines has been mixed. The company has repeatedly underestimated how long it would take for virtual reality to reach mainstream adoption.
Meanwhile, Meta continues to spend heavily on artificial intelligence infrastructure. The company announced plans to spend between $115 billion and $135 billion on capital expenditures in 2026, nearly double the $72 billion spent in 2025. Most of this spending will support AI development and data centers.
The contrast is telling. Meta is pouring record amounts into AI while scaling back its VR ambitions. The company's advertising business remains its financial engine, generating the revenue needed to fund these experimental divisions. As long as ads remain profitable, Meta can afford to lose billions on VR. The question is whether that will always be the case.
