Meta's Chief Financial Officer Susan Li has provided crucial insights into the company's strategic direction for its Reality Labs division during the Q4 2025 earnings call. While confirming that Meta continues to develop future headsets and maintains optimism about virtual reality's long-term potential, Li made it clear that wearables rather than VR will drive the division's spending moving forward.
Reality Labs Financial Reality: Massive Losses Continue
The financial numbers present a sobering picture of Reality Labs' performance. In fiscal 2025 alone, the division reported staggering operating losses of $19.2 billion while generating just $2.2 billion in revenue. This represents an 8.3% increase in losses compared to the previous year. Since its inception in 2020, Reality Labs has now accumulated total losses exceeding $83 billion, with only $11.8 billion in cumulative revenue to show for this massive investment.
Strategic Shift: From VR to Wearables
Li responded directly to a Deutsche Bank analyst's question about whether Reality Labs would narrow its focus exclusively to wearables. Her answer revealed a significant strategic pivot: "We are meaningfully reducing our investment in VR and Horizon this year, but we're growing our investment in wearables." This statement clarifies that while VR hasn't been abandoned completely, wearables now represent the primary investment focus for the division.
Recent Restructuring and Project Cancellations
The financial realities have already triggered substantial organizational changes. Earlier this month, Meta eliminated approximately 1,500 positions from Reality Labs, representing about 10% of the division's workforce. The company also shut down three VR game studios, canceled the highly anticipated Batman: Arkham Shadow sequel, and retired Horizon Workrooms, its virtual meeting platform.
Market Performance: Smart Glasses Soar While Quest Declines
The market performance data reveals a dramatic contrast between VR headsets and wearable devices. Quest headset sales actually declined during 2025, while Ray-Ban Meta smart glasses experienced explosive growth with sales more than tripling. The demand for these AI-powered glasses has been so strong that Meta had to delay the international rollout of its Ray-Ban Display glasses because US demand consistently outstripped supply.
CEO Mark Zuckerberg articulated the strategic importance of this shift to investors, stating that he views AI glasses as "the main way that we integrate superintelligence into our day-to-day lives." This represents a notable departure from the metaverse-focused vision that prompted Facebook's corporate rebranding to Meta in 2021.
Financial Projections and Future Outlook
Li provided investors with forward-looking guidance about Reality Labs' financial trajectory. She indicated that 2026 losses should remain roughly flat compared to 2025's $19.2 billion, with the company expecting losses to begin declining starting in 2027. Zuckerberg framed this projection optimistically, suggesting that VR would evolve into "a profitable ecosystem over the coming years."
Future Headset Development Continues
Despite the reduced investment in VR, Li confirmed that Meta continues developing future headsets. Leaked internal memos from December 2024 suggest the company is working on two distinct devices: an ultralight tethered headset and a traditional Quest 4 focused primarily on gaming. Reports indicate the Quest 4 won't arrive before late 2027 and will carry a higher, unsubsidized price point compared to previous models.
The overall picture that emerges is one of strategic recalibration rather than abandonment. The metaverse vision that once dominated Meta's corporate narrative hasn't been discarded entirely, but it's now operating under significantly tighter financial constraints. The company appears to be pursuing a more balanced approach that prioritizes near-term wearable opportunities while maintaining longer-term VR development at a reduced scale.
