Meta Platforms Reshapes Strategy: Reality Labs Cuts Signal Major AI Pivot
Reports from the New York Times say that Meta Platforms is getting ready to fire about 10% of its Reality Labs employees this week. This is
Quick overview
- Meta Platforms is reportedly planning to lay off about 10% of its Reality Labs employees, approximately 1,500 out of 15,000, as it shifts focus from the metaverse to artificial intelligence.
- Reality Labs has incurred over $70 billion in losses since its inception in August 2020, prompting Meta to restructure and cut its metaverse budget significantly.
- The company is reallocating funds from Reality Labs to its wearables division and has launched Meta Compute to enhance its AI infrastructure, aiming for substantial computing power growth.
- Despite a slight increase in stock value over the past month, Meta's stock performance remains below the industry average, reflecting challenges in the metaverse market compared to more successful gaming platforms.
Reports from the New York Times say that Meta Platforms is getting ready to fire about 10% of its Reality Labs employees this week. This is the latest step in the tech giant’s drastic shift away from developing the metaverse and toward artificial intelligence.
The changes, which might be made public as soon as Tuesday, will likely affect about 1,500 of Reality Labs’ 15,000 employees. As Meta shifts its focus to AI development, the division that makes virtual reality hardware like headsets and runs the metaverse platforms Horizon Worlds and Horizon Workrooms has become less important.
Mounting Metaverse Losses Drive Restructuring
Meta is restructuring since it is losing a lot of money on its metaverse plans. Reality Labs has lost more than $70 billion since it opened in August 2020. In the third quarter of 2025 alone, it lost $4.4 billion in operations. Meta has been slowly cutting its metaverse budget over the past year because of financial stress. In December, sources said that Reality Labs would lose up to 30% of its funding.
The business aims to move some of its Reality Labs financing to its wearables division, which focuses on smart glasses and products like the Meta Neural Band. This is a more practical way to build technology with more concrete commercial purposes.
Meta’s AI Infrastructure Takes Center Stage
As Reality Labs was cutting back, Meta announced the start of Meta Compute, a top-level project to build huge computing infrastructure for long-term AI development. Mark Zuckerberg, the CEO, said that this decade they want to build “tens of gigawatts” of computer power, which might grow to “hundreds of gigawatts or more over time.”
The project, which is being directed by infrastructure director Santosh Janardhan and AI capacity planning head Daniel Gross, shows that Meta is serious about making computing capacity a key strategic advantage. Before joining Meta last year, Gross co-founded Safe Superintelligence with Ilya Sutskever, who used to be the principal scientist at OpenAI.
To help with this push for infrastructure, Meta recently announced deals for nuclear energy projects that could add up to 6.6 gigawatts of new electricity capacity by 2035. This would help meet the huge power needs of AI data centers, such as the Prometheus AI supercluster in Ohio.
META Stock Market Performance and Technical Outlook
On Monday, Meta’s stock closed at $641.97, down 1.7% even though the rest of the market went up. The S&P 500 went up 0.16%. The stock has gone up 1.37% in the last month, but that’s less than the S&P 500’s 1.89% monthly gain.
Meta’s forward P/E ratio of 21.65 is lower than the industry average of 24.48, which could mean that it has more value than its peers. The company’s PEG ratio of 1.31 is also better than the Internet-Software industry average of 1.49.
Analysts predict the company to make $8.16 per share in the fourth quarter, which is a 1.75% increase from the same time last year. They also expect the company to make $58.4 billion in sales, which is a 20.69% increase. Estimates for the whole year say that earnings per share will be $23.04 on sales of $199.46 billion. Meta is now ranked #3 by Zacks (Hold), which means that analysts have some trust in the stock.
The strategic realignment is based on harsh truths about how people are using the metaverse. For example, The Sandbox only had 776 unique active wallets over 30 days, and Horizon Worlds reportedly has fewer than 900 daily users. This is a big difference from gaming metaverses like Roblox and Fortnite, which have hundreds of millions of daily users.
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