Meta’s VR Unit Loses $19 Billion in 2025 Amid Layoffs

Meta's Reality Labs division lost $19.1 billion in 2025, a jump from $17.7 billion the year before. The unit behind the company's virtual reality efforts posted these numbers in its latest quarterly earnings. Losses reached $6 billion in the final three months of the year. This comes after layoffs that cut about 10 percent of the division's staff, or up to 1,000 jobs. The moves show Meta pulling back on some VR plans while its main ad business keeps growing.

Background

Meta started pushing hard into virtual reality and the metaverse back in 2021. The company renamed itself from Facebook to signal this shift. Mark Zuckerberg, the CEO, saw VR as the next big thing after social media. Reality Labs became the home for all work on VR headsets, augmented reality glasses, and related software.

Over the years, the division has spent billions. Losses piled up each year. In 2024, they hit $17.7 billion. By 2025, that grew to $19.1 billion. Revenue did not keep pace. The unit brought in just $2.2 billion for the full year. In the fourth quarter, sales were $955 million against that $6 billion loss.

The big spending covered research, hardware development, and content creation. Meta released new Quest headsets and experimented with apps like Horizon Worlds. But use stayed mostly in gaming. Office tools and social spaces did not catch on wide.

Layoffs started earlier this month. Reports say Meta cut 1,000 to 1,500 jobs in Reality Labs. The company also closed some internal VR studios. It plans to end its Workrooms app, a virtual meeting tool. These steps follow years of hype that did not turn into steady sales.

Meta's overall business did well. Ad revenue hit $58 billion in the fourth quarter, up 24 percent. Total revenue reached nearly $60 billion. But Reality Labs drags on the bottom line. Investors watch closely as the company spends more on AI servers and data centers.

Key Details

Financial Breakdown

Reality Labs' losses widened despite small revenue gains. Fourth-quarter sales rose 13 percent from the year before. But operating losses jumped 21 percent in that period. Cumulative losses for the division top $80 billion since late 2020.

Meta expects total spending in 2026 to hit $115 billion to $135 billion. Most goes to AI infrastructure. Reality Labs losses should stay around 2025 levels this year. That means another $19 billion or so. Zuckerberg called 2026 the peak before a slow drop.

The company laid off staff to refocus. It shut VR studios and dropped projects like Workrooms. Horizon Worlds, a VR social platform, will move to mobile apps. Meta wants to blend it with AI for wider reach.

"I expect Reality Labs losses this year to be similar to last year," Mark Zuckerberg said on the earnings call. He added the year would likely be the peak.

Strategic Shifts

Meta now puts most Reality Labs money into glasses and wearables. VR hardware takes a back seat. AI gets the priority across the company. New glasses with AI features aim for everyday use. The Quest line continues, but growth slows.

Andrew Bosworth, Meta's tech chief, said the VR market grows slower than hoped. The layoffs aim to match resources to demand. Meta still builds VR software but ties it to its big apps like Facebook and Instagram.

What This Means

These losses highlight the gap between Meta's VR vision and market reality. The division relies on ad profits from the core business. Without a hit product, it stays a cost center. Shutting studios and apps signals less bet on full VR worlds.

Investors see AI as the real growth area. Meta plans huge spending on AI tools for ads, content, and user features. Ad systems already use AI to boost sales. Video ad tools hit $10 billion in run-rate revenue.

For Reality Labs, the path forward ties to hybrids. Smart glasses could blend AR with phones. Mobile VR experiences might reach more people. But profitability stays years away. Layoffs free up talent for AI work.

The VR push cost billions with little return. Gaming sells headsets, but daily use lacks. Competitors like Apple enter with mixed reality, but Meta leads in volume. Still, high prices and bulky gear limit appeal.

Meta's 3.5 billion daily users stick to phones and web. Bringing them into VR needs big leaps. For now, Reality Labs tests ideas while AI drives the company. Losses continue, but the ad engine covers them. The shift shows VR as one piece, not the future.