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

Meta is eliminating approximately 10% of its workforce at the Reality Labs division as part of extensive reductions impacting over 1,000 employees. This restructuring involves shutting down several VR-focused studios, including 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 cuts reflect Meta’s strategic shift away from the Metaverse toward artificial intelligence, smartphones, and wearable technology.

The reductions 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), with developers from affected studios expressing their surprise across social media platforms 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 is renowned for popular Xbox Live Arcade titles such as The Maw (2009) and 'Splosion Man. The studio joined Microsoft Studios in 2011, releasing Kinect-exclusive shooter The Gunstringer on Xbox 360 and the title LocoCycle for Xbox One. It regained independence in 2015 before transitioning into VR game development.

Meta acquired Armature and Twisted Pixel in late 2022, having previously purchased Sanzaru in 2020. However, the company is now significantly scaling back 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 and invested heavily in 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 now attracting developers from Roblox to create experiences for Horizon Worlds.