Meta Shuts 3 VR Studios and Lays Off Hundreds of Devs as It Pivots From Virtual Reality and the Metaverse to AI

Meta is reducing its workforce by approximately 10% within the Reality Labs division, a move that will impact over 1,000 employees as part of broader restructuring efforts. This includes shutting down several VR-focused studios, such as Twisted Pixel (known for Deadpool VR), Armature Studio (Resident Evil 4 VR developer), 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, mobile devices, and wearable technology.

The layoffs occur slightly more than 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), with developers from affected studios expressing their surprise across social media platforms throughout the day.

"I’ve just been laid off, and it looks like the entire Twisted Pixel games studio has closed down. Sanzaru Games as well," one former employee said, while a designer wrote: "Unfortunately, I was among those laid off at Meta today and am now looking for new opportunities. To my Twisted Pixel Games family: it was an honor to work with you for 3.5 years and launch Marvel's Deadpool VR. We created something truly special together that no one can ever take away."

Twisted Pixel is known for several hit Xbox Live Arcade titles, including The Maw (2009) and 'Splosion Man. It joined Microsoft Studios in 2011, releasing Kinect-exclusive shooter The Gunstringer on Xbox 360 and the Xbox One title LocoCycle, before becoming independent again in 2015 to focus on VR game development.

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

In a statement confirming the closure of the three studios, Meta said: "Last month we announced that we were shifting some investment from Metaverse toward Wearables. This move supports that effort, and we plan to reinvest these savings to drive wearables growth this year."

According to Reuters, CEO Mark Zuckerberg prioritized heavy spending on the metaverse, resulting in over $60 billion lost since 2020. Reality Labs also develops Meta’s Quest mixed-reality headsets. Despite the cuts, CNBC reports that Meta is not abandoning VR entirely; instead, it is encouraging developers who create games for Roblox to build experiences within Horizon Worlds.