Meta is reducing its workforce by approximately 10% within the Reality Labs division, a move that will impact over 1,000 employees across sweeping cuts. This restructuring includes shutting down several VR-focused studios, such as Twisted Pixel (known for Deadpool VR), Armature Studio (developer of Resident Evil 4 VR), and Sanzaru Games (creator of Asgard's Wrath). According to Bloomberg, these reductions coincide with Meta’s strategic shift away from the Metaverse toward artificial intelligence, smartphones, and wearable technology.

The layoffs occur just over four years after Facebook rebranded as Meta and heavily invested in virtual reality and the metaverse concept.

Notification letters were reportedly sent out on Tuesday morning (January 13), prompting developers from affected studios to express their surprise on social media throughout the day. "I've just been laid off. It appears the entire Twisted Pixel games studio has been shut down. Sanzaru Games, too," one former employee said, while a designer wrote: "unfortunately, I was part of the layoffs today at Meta, and will be seeking a new role. To my Twisted Pixel Games family: it was an honor to work alongside you for 3.5 years and ship Marvel's Deadpool VR. We made something really special together and no one can ever take that away."

Twisted Pixel previously gained fame with popular Xbox Live Arcade titles like The Maw (2009) and 'Splosion Man. Acquired by Microsoft Studios in 2011, the studio released Kinect-exclusive shooter The Gunstringer for Xbox 360 and LocoCycle for Xbox One before regaining independence in 2015 and transitioning into VR development.

Meta acquired Armature and Twisted Pixel in late 2022, having purchased Sanzaru in 2020. However, the company is now divesting much of its internal VR operations as it attempts to recoup billions in losses and redirect focus toward AI.

In an official statement, Meta confirmed the closure of the three studios: "we said last month that we were shifting some of our investment from Metaverse toward Wearables. This is part of that effort, and we plan to reinvest the savings to support the growth of wearables this year."

According to Reuters, CEO Mark Zuckerberg prioritized heavy spending on the metaverse, resulting in Reality Labs burning through more than $60 billion since 2020. The division also develops Meta’s Quest mixed-reality headsets. Despite these cuts, CNBC reports that Meta is not abandoning VR entirely; instead, it is actively courting Roblox developers to create experiences for Horizon Worlds.