Core Insights - Meta's Reality Labs, its virtual reality unit, has faced significant financial losses, totaling approximately $19.1 billion in 2025, which is an increase from $17.7 billion in 2024 [2] - The company has laid off 10% of its Reality Labs staff, equating to around 1,000 employees, as part of a broader strategy to address ongoing losses [1] Financial Performance - In 2025, Reality Labs generated $2.2 billion in sales, with $955 million in Q4 alone, while incurring a loss of $6.2 billion in the same quarter [2] - Losses for Reality Labs are expected to remain consistent in 2026, with Zuckerberg indicating that this year may represent a peak in losses before a gradual reduction [3][4] Strategic Direction - Meta is shifting its investment focus towards glasses and wearables, aiming to make its Horizon platform successful on mobile and establish a profitable VR ecosystem [4] - The company plans to close several VR studios and retire its standalone Workrooms app, signaling a diminishing interest in virtual reality [5]

Core Insights - Meta's Reality Labs unit reported a significant operating loss of $6.02 billion on $955 million in sales for the fourth quarter, exceeding analyst expectations of a $5.67 billion loss on $940.8 million in revenue [2] - Since late 2020, Reality Labs has accumulated over $75 billion in total operating losses, indicating the high costs associated with Meta's metaverse initiatives [2] - The company laid off more than 1,000 employees from Reality Labs to reallocate resources towards artificial intelligence and wearable devices, including the new Ray-Ban Meta smart glasses [3] Company Strategy - Meta's tech chief Andrew Bosworth stated that the company is not abandoning its VR efforts, although the market is growing slower than anticipated [4] - The company did not release a new Quest VR headset last fall but introduced the AI-powered Meta Ray-Ban Display glasses priced at $799, featuring a digital screen on one lens [4]

Core Insights - Meta Platforms Inc. is set to report its fourth-quarter earnings, with a focus on the impact of its revamped artificial intelligence strategy for 2026 [1] - The company invested $14.3 billion in Scale AI to enhance its AI capabilities, particularly under the leadership of founder Alexandr Wang [1][2] AI Strategy and Investments - Meta's AI unit, TBD, was established following a lukewarm reception of its Llama 4 model, and it is currently developing a new model code-named Avocado, expected to launch in the first half of the year [2] - The company is also investing heavily in data center infrastructure, committing up to $6 billion to Corning for fiber-optic cables through 2030 [3] - CEO Mark Zuckerberg emphasized the necessity of these investments in AI, despite concerns from investors regarding costs [3][4] Financial Projections - Meta's capital expenditures related to data centers are projected at $21.97 billion for the quarter, with expected online advertising sales of $56.98 billion [4] - Analysts predict that the number of daily active users will reach 3.58 billion in the fourth quarter [5] Reality Labs Unit - The Reality Labs unit, which focuses on virtual and augmented reality, is expected to report an operating loss of $5.67 billion on sales of $940.8 million for the fourth quarter [6][7] - This unit has accumulated over $70 billion in total operating losses since late 2020, raising concerns about its future viability [7] Earnings Estimates - Analysts estimate earnings per share at $8.21 and revenue at $58.35 billion for the upcoming report [8]

Core Insights - Meta is reducing its investment in the virtual reality (VR) sector due to slower-than-expected growth rates in this area [3][4] - The company has shut down three previously acquired VR game studios and laid off a significant number of employees from a fourth studio, while also canceling the development of a sequel to "Batman: Arkham" and terminating the "Horizon Workrooms" project [3] - Meta is shifting its focus towards mobile applications, particularly the "Horizon Worlds" platform, which has shown promising user growth on smartphones [3][4] Investment Strategy - Meta's CTO, Andrew Bosworth, stated that the company will continue to invest heavily in VR, but the scale of investment will be aligned with business development [3] - The strategic shift involves concentrating resources on mobile development to enhance efficiency, as the mobile market presents a larger user base compared to VR [4] - The company plans to increase investment in the mobile version of "Horizon Worlds," reflecting a significant adjustment in its strategic focus over the past year [4] Future Direction - Bosworth indicated that previous investments in the VR version of "Horizon Worlds" may have compromised user experience, and the company will now prioritize building a third-party content ecosystem [4] - Meta aims to allow users to choose their preferred content independently, reducing its own content development efforts in the VR space [4]

Core Insights - Meta is shifting its focus from virtual reality (VR) to artificial intelligence (AI) and smart glasses, raising concerns about the future of the VR industry [1][3][4] - The company recently laid off 10% of its Reality Labs employees, primarily affecting VR-related projects, resulting in approximately 1,000 job cuts [2][4] - Meta's Reality Labs has incurred over $70 billion in cumulative losses since late 2020, indicating significant financial challenges in the VR sector [4] Company Actions - Meta's layoffs are part of a broader strategy to redirect investments from VR to AI and wearable devices, such as the Ray-Ban Meta smart glasses [3][4] - The company introduced the $799 Meta Ray-Ban Display glasses at its annual Connect conference, marking a departure from its traditional focus on VR hardware [5][6] - Meta's tech chief Andrew Bosworth emphasized that the company is not abandoning VR but is adjusting its investment strategy due to slower-than-expected growth in the VR market [6] Industry Trends - Market research firm IDC reported a significant transition in the Extended Reality (XR) device segment, with VR and mixed-reality headset shipments expected to drop by 42.8% to 3.9 million units in 2025 [9] - In contrast, AI-powered smart glasses are projected to grow by 211.2% year-over-year, reaching 10.6 million units shipped in 2025 [9] - The VR headset market is characterized as niche, appealing primarily to a small segment of video gamers, with average consumers showing little interest in bulky headsets [10] Developer Perspectives - VR developers express concern over the future of the industry, noting that while Meta is not completely abandoning VR, a significant shift is underway [5][6] - Some developers believe that Meta's focus on Horizon Worlds has hindered third-party developers' visibility and opportunities within the VR ecosystem [12][13] - The enterprise VR market is showing slow but positive growth, as companies recognize the return on investment associated with deploying VR headsets [16]

Core Viewpoint - Meta has announced layoffs of over 1,000 employees in its Reality Labs division, raising concerns about a potential retreat from its metaverse strategy [1] Group 1: Layoffs and Strategic Implications - The layoffs represent approximately 10% to 15% of the 15,000 employees in the Reality Labs division, but do not indicate a reduction in the metaverse strategy [3] - The layoffs are described as a compression of normal personnel turnover from six months to 60 days, suggesting it is not a fatal blow to the division [4] - The affected positions are primarily in first-party content development, which has negatively impacted the overall virtual reality ecosystem [4] Group 2: Industry Dynamics and Ecosystem Health - The competition from Meta's first-party studios has created an imbalance in the market, making it difficult for third-party developers to compete due to the larger budgets of Meta's studios [4] - Despite the high quality and acclaim of the first-party studio outputs, they have inadvertently exacerbated the industry's ecosystem issues by overshadowing independent developers [4] - The adjustment is seen as a return to the original Oculus philosophy, aiming to create a more open ecosystem that allows other developers to share in the benefits [5]

Industry Overview - Virtual reality stocks represent publicly traded companies involved in developing, manufacturing, or supporting VR hardware, software, content, and related services, often including AR and MR technologies [2] - These stocks are grouped by investors due to their exposure to the commercialization of immersive technologies, which present high growth potential alongside significant risks [2] Company Summaries - **Meta Platforms, Inc. (META)**: Engages in developing products for connecting people through mobile devices, PCs, VR headsets, and wearables, operating in two segments: Family of Apps and Reality Labs [3] - **zSpace Technologies, Inc. (ZSPC)**: Provides augmented and virtual reality technology primarily for the education market, offering differentiated hardware and learning software for K-12 and workforce-oriented applications [4] - **The Glimpse Group, Inc. (VRAR)**: A VR and AR platform company that delivers enterprise-focused software and solutions, including QReal for 3D interactive models, Immersive Health Group for healthcare solutions, and Foretell Reality for social VR applications [5] - **DIH Holding US, Inc. (DHAIW)**: Operates as a robotics and VR technology provider in the rehabilitation industry, offering products like ArmeoPower and ArmeoSpring for arm and hand therapy [6]

Core Insights - Meta's recent layoffs in its Reality Labs division have put the popular VR fitness app "Supernatural" in a state of crisis regarding updates [1][4] - The app, launched in 2020 and acquired by Meta in 2022, has been a consistent top performer in Meta's VR app store [4] - The layoffs have led to a reduction in the app's team, resulting in no new songs or courses being added, while the annual subscription fee of $100 remains unchanged [4] - Users have expressed strong disappointment on social media, urging Meta to reinvest in the app [4] - The changes are part of Meta's strategic shift towards AI, moving away from the loss-making VR and metaverse business, which also includes the shutdown of three internal VR game studios [4]

Group 1 - Meta has conducted significant layoffs in its Reality Labs division, impacting the popular VR fitness app "Supernatural" which is now facing a content update crisis [1][4] - "Supernatural," launched in 2020 and acquired by Meta in 2022, has been a consistent top performer in Meta's VR app store, combining fitness courses with VR gaming experiences [4] - The layoffs have led to a reduction in the app's team, resulting in no new songs or courses being added, while the annual subscription fee of $100 remains unchanged, causing user dissatisfaction [4] Group 2 - The changes are part of Meta's strategic shift to redirect funds towards the AI sector, moving away from the loss-making VR and metaverse businesses [4] - In addition to "Supernatural," three internal VR game studios have also been shut down as part of this strategic realignment [4]

Core Viewpoint - Meta is significantly reducing its workforce in the Reality Labs department, which focuses on the metaverse, by 10%, affecting approximately 1,500 employees, as part of a strategic shift towards AI-related initiatives [2][3]. Group 1: Workforce Reduction and Financial Impact - Meta plans to lay off about 1,500 employees from its Reality Labs department, which has accumulated losses exceeding $70 billion (approximately 488 billion RMB) from Q4 2020 to Q3 2025 [3]. - The Reality Labs department currently employs around 15,000 people, meaning the layoffs represent about 10% of its workforce, which is a small fraction of Meta's total employee count of 78,000 [7]. Group 2: Strategic Shift Towards AI - Meta is prioritizing the development of AI-related businesses, including increasing the budget for its TBD lab focused on creating "super intelligence" [4]. - The company plans to invest hundreds of billions in building data centers and is offering high salaries to attract top talent in the AI field [4]. Group 3: Focus on Wearable Technology - Meta aims to increase the budget for its wearable division to enhance its AI glasses products, which are seen as a key component in integrating super intelligence into daily life [6]. - The AR department, responsible for products like the successful Ray-Ban, is expected to remain unaffected by the layoffs, indicating a strategic focus on augmented reality [10]. Group 4: Challenges in VR Market - The layoffs will predominantly impact personnel involved with VR headsets and VR social networks, as Meta's VR headset sales have been underwhelming since the acquisition of Oculus in 2014 [8]. - Despite the challenges in the metaverse sector, Meta is not abandoning its metaverse ambitions but is redefining its approach in light of the growing importance of AI glasses [12]. Group 5: Competitive Landscape - As the competition in AI intensifies, Meta is reallocating resources towards AI model development and the creation of AI glasses, while the significance of VR headsets has diminished [13]. - The upcoming competition in AI glasses poses challenges for Meta, especially with Chinese manufacturers showing advantages in technology development and product iteration speed [13].