Meta’s Reality Labs division continued its losing streak with another $4.2 billion down the drain in the first quarter of 2025. CEO Mark Zuckerberg’s stated priorities on Wednesday’s earnings call suggest his metaverse dream is well and truly over.
The social media giant released its first-quarter earnings report, beating analyst expectations and causing shares to pop. Meta’s entire business is essentially its family of apps – from Facebook to WhatsApp – which recorded $41.9 billion in revenue (up 16 percent year on year) and $21.8 billion in net income (up 23 percent) in the first three months of 2025.
Meanwhile, the aforementioned Reality Labs group, responsible for Meta’s various metacurse, er, verse and VR projects, wiped out a chunk of those profits.
The unit’s $4.2 billion loss – steeper than the year-ago’s $3.8 billion loss – was still slightly better than Wall Street’s average forecast of $4.6 billion. However, sales of Reality Labs products like Quest VR headsets and Ray-Ban smart glasses fell short, bringing in just $412 million versus the expected $493 million.
Despite those losses, which have topped $60 billion since the unit’s inception in 2020, Zuckerberg kept touting its potential for a long time, saying as recently as January’s Q4 2024 earnings call that 2025 was “going to be a pivotal year for the metaverse.”
This week’s call sounded a change in tune.
“The major theme right now of course is how AI is transforming everything we do,” Zuck said on the latest earnings call following the release of Q1 earnings. “As we continue to increase our investments and focus more of our resources on AI, I thought it would be useful today to lay out the five major opportunities that we’re focused on: improved advertising, more engaging experiences, business messaging, Meta AI, and AI devices.”
The metaverse didn’t get a single mention. True, “AI devices” technically covers headsets and smart glasses from Reality Labs, but the immersive virtual worlds that once drove Zuckerberg to rebrand the company have quietly disappeared from the spotlight. In their place: a full-court press on AI, the latest Silicon Valley fixation.
Lab layoffs come into focus
Reality Labs reportedly laid off more than 100 people last week, with Zuck & Co. admitting teams inside the division’s Oculus Studios VR team had been restructured to make Reality Labs “work more efficiently on future mixed reality experiences,” as a Meta spokesperson told Bloomberg.
Forrester VP and research director Mike Proulx, who leads the consultancy’s research into marketing, thinks it all means Meta’s metaverse is dead.
I predict come end of this year, Meta will shutter its metaverse projects, like Horizon Worlds
“I predict come end of this year, Meta will shutter its metaverse projects, like Horizon Worlds,” Proulx told The Register in an email. That doesn’t necessarily mean Reality Labs will be shuttered, though. It could still work on the AI glasses that Zuck is constantly wearing, for instance.
“Reality Labs is bigger than Meta’s metaverse software platforms. It also includes initiatives like Meta’s AI glasses which is a material growth area for the company. So, yes, Reality Labs will continue should Meta jettison its metaverse projects that aren’t gaining traction.”
That said, he thinks AI will be the big new push in Zuckerworld. “Unlike the metaverse, Meta has made demonstrable progress with AI and it’s benefiting people now,” Proulx continued. “It’s also helping to future proof Meta as a growth company should its family of apps get decimated by the current antitrust case.”
With the metaverse, Zuck and company were trying “to solve for a problem that just doesn’t exist,” said Proulx. The change in focus appears to have paid off for Meta shareholders so far, with shares up more than 5 percent since the earnings call yesterday.
“Virtual worlds and virtual reality remain a niche play on the consumer side,” Proulx told us. “That is unlikely to change anytime soon.”
It seems Mark may have finally gotten the message. Now, to do something about that company name he’s saddled himself with. ®
