Meta Stock Slips on Fresh Layoffs in a Metaverse Division
The tech giant is cutting 1,500 jobs in its Reality Labs unit, which has lost over $70 billion, signaling a strategic pivot from its metaverse vision toward AI.
Meta Platforms (META) shares fell in recent trading after the company announced another round of layoffs in its ambitious and costly Reality Labs division, raising fresh questions about the future of its metaverse strategy.
The stock declined by approximately 2.3%, closing at $616.42, after news broke that the company is cutting around 1,500 jobs. The move impacts about 10% of the workforce in the unit responsible for developing the virtual reality hardware and software central to Mark Zuckerberg’s vision for the next generation of computing.
The restructuring is being viewed by investors and analysts as a pragmatic, if reluctant, pivot away from the all-in metaverse bet that prompted the company's name change from Facebook in 2021. The cuts come as the Reality Labs division continues to bleed cash, with accumulated operating losses exceeding $70 billion since 2020. The division reported a staggering operating loss of $4.43 billion in the third quarter of 2025 alone.
Analysts have characterized the move as a necessary step to instill financial discipline. In a note, analysts at Wedbush described the layoffs as a "discipline shift toward consumer wearables (and away from broad metaverse bets), which could improve capital efficiency but delays returns." This sentiment was echoed across the Street, with many seeing the decision as an acknowledgment that the mass adoption of a fully immersive metaverse remains a distant prospect.
The layoffs reportedly affect teams working on the development of VR headsets and the Horizon Worlds social platform. This comes as sales for the company's flagship Quest VR headsets have underperformed expectations, declining 16% in the first three quarters of 2025 compared to the prior year. In contrast, Meta has found surprising traction with its more grounded AI-infused products, such as the Ray-Ban Meta smart glasses, which reportedly saw a 40% sales increase in 2024.
This strategic recalibration sees Meta reallocating significant resources toward its burgeoning artificial intelligence initiatives. The company is heavily investing in the data centers and advanced computing infrastructure required to compete in the generative AI race, a move that requires immense capital and focus.
Despite the day's stock dip, broader analyst sentiment on Meta remains remarkably positive. The company holds over 60 'Buy' or 'Strong Buy' ratings from analysts, with an average price target of $835.42, suggesting Wall Street believes the core advertising business and the pivot to AI will ultimately outweigh the costly metaverse experiment. Some firms, like TD Cowen, maintained a "Buy" rating and even raised their price target following the news, citing a "near-term valuation upside narrative."
However, the latest job cuts represent a significant crossroads for Meta. The decision to trim its Reality Labs workforce signals a more pragmatic approach to spending and innovation, which may appease anxious investors. Yet, it also represents a tangible retreat from the grand, world-building vision that defined the company's identity for the past several years, leaving its long-term growth narrative increasingly tied to the fiercely competitive landscape of artificial intelligence.