Meta's Reality Labs Layoffs and Potential Metaverse Exit
The recent layoffs in Meta's Reality Labs division, primarily affecting VR gaming and Supernatural VR fitness app teams, add to the growing concerns about the company's metaverse efforts. The comments from Forrester vice president Mike Proulx, suggesting that Meta may shutter its metaverse projects like Horizon Worlds by the end of the year, are particularly noteworthy.
The contrast between Meta's successful Family of Apps and the struggling Reality Labs division is striking. While the former continues to grow, the latter is experiencing declining revenue and increasing losses. This disparity may ultimately lead to a reassessment of Meta's metaverse priorities and a potential exit from the market.
The potential demise of Meta's metaverse projects would have significant implications for the industry, and it will be interesting to see how this unfolds. If Meta does indeed abandon its metaverse efforts, it could have a ripple effect on other companies and investors who have been following Meta's lead in this space.
Note: The metaverse landscape is rapidly evolving, and Meta's decisions will likely have a significant impact on the industry. As the situation develops, it will be essential to monitor Meta's next steps and their potential consequences for the metaverse and virtual reality markets.
Horizon Worlds, Meta's social VR app in which users interact as avatars in shared digital spaces, was once the company's poster child for the metaverse. However, it has struggled to gain mainstream traction.
Over the 2024 holidays, Meta's Horizon app briefly topped app store charts — not because of surging interest in the metaverse, but because it's required to set up a new Quest headset. It signaled that the devices were a popular gift.
That momentum didn't stick. On this week's earnings call, Meta said Quest sales underperformed, dragging Reality Labs' revenue down 6% year-over-year.
On the call, Evercore analyst Mark Mahaney asked what might finally shrink those multibillion-dollar losses.
"There are more investments that I think make sense to make," Meta CEO Mark Zuckerberg responded, citing the growth of Meta's AI glasses and a vision to eventually sell tens of millions of units.
Internally, the stakes are high. Meta CTO Andrew Bosworth has said 2025 is the "most critical" year for the company's metaverse effort, warning staff that without real traction, the whole thing could go down as a "legendary misadventure."
Reality Labs, which includes the Quest headsets, Horizon Worlds, and Meta's Ray-Ban smart glasses, is structured into two units: Metaverse and Wearables. In January, Meta quietly reshuffled the division, moving top sales and marketing leads under broader company leadership to align more tightly with its AI push.
For now, Meta is still in the fight, though its momentum has clearly moved elsewhere: to its Llama AI models, Meta AI, and those Ray-Bans. The metaverse may not be dead yet, but it's no longer center stage.
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