Meta's Strategic Pivot: AI Dominates Social, Horizon Worlds Goes Mobile Amidst Reality Labs Losses

Meta is undergoing a significant strategic reorientation, emphasizing artificial intelligence as the future of social media and prioritizing mobile platforms for its virtual world, Horizon Worlds. This shift is accompanied by continued investment in VR hardware, despite substantial losses reported in its Reality Labs division and a reduction in its workforce within that unit.

The AI-Powered Future of Social Media

Meta CEO Mark Zuckerberg has indicated a strategic shift towards an AI-generated social feed, stating his belief that AI will become the next major media format. He envisions AI enhancing feeds to be "more immersive and interactive," evolving from previous formats like text, photos, and video.

Zuckerberg anticipates Meta's applications will transition to AI that "understands" users, delivers personalized content, and can "generate great personalized content." This includes adding a "huge corpus of content" to recommendation systems as AI facilitates content creation and remixing. The Meta AI app has already implemented a "Vibes" feed, which features short, AI-generated videos.

Future formats hinted at include users creating worlds or games using prompts, which can then be shared, and interactive videos where users can "tap on and jump into it and… experience it in a more meaningful way."

Meta plans to expand revenue streams through its Meta AI chatbot, with Zuckerberg mentioning opportunities for "subscriptions and advertising." The company is making substantial investments in AI talent and data centers, with a stated goal of building "superintelligence."

Horizon Worlds Shifts to Mobile Priority

Meta has announced a strategic shift for its virtual world, Horizon Worlds, prioritizing mobile platforms. This move is intended to enhance competition with platforms like Roblox and Fortnite, which offer user-generated experiences accessible on mobile devices. A Meta representative stated that prioritizing mobile for Horizon Worlds aims to access a larger market.

Horizon Worlds, initially launched in 2021 as a VR platform before expanding to web and mobile, is now described as "almost exclusively mobile" and "going all-in on mobile." Samantha Ryan, Reality Labs’ VP of content, stated that Meta is positioned to deliver synchronous social games at scale by connecting them with its social networks.

Despite this mobile prioritization, Meta CTO Andrew Bosworth confirmed the company will maintain VR support for Horizon Worlds, reversing an earlier plan to transition the application to web and mobile-only platforms. Bosworth indicated that the mobile platform exhibits a stronger product-market fit and a larger user base.

The Horizon Worlds mobile app has achieved 45 million total downloads globally across iOS and Google Play, with 1.5 million downloads in 2026. Consumer spending on the app is estimated at $1.1 million in total.

Reality Labs Navigates VR Losses and Hardware Commitment

Meta's Reality Labs division, which encompasses VR, AR, and some AI research, has reported significant operating losses. Figures reported include $6.02 billion in the final quarter of 2025, over $19 billion in 2025, nearly $80 billion since 2020, and $73 billion since 2021. Despite these figures, Reality Labs is not discontinuing operations.

The company stated its ongoing commitment to VR hardware, with a "robust roadmap of future VR headsets tailored to different audience segments." Reality Labs is responsible for products such as the Quest virtual reality goggles and Ray-Ban AI glasses. Meta also plans to introduce new glasses for streaming content in the coming years. Sales of Meta's glasses reportedly tripled in the last year.

Meta is focusing on supporting third-party VR developers, noting that 86% of VR headset usage time is spent on third-party applications. Challenges persist in expanding VR headset adoption beyond gamers. The market for VR hardware has faced challenges; IDC reported a 16% year-over-year decline in Meta Quest headset sales from 2024 to 2025. Apple also reduced production of its Vision Pro headset due to limited demand.

Meta asserts that the metaverse is not exclusively tied to headsets and can encompass phone-based or phone-and-glasses integrated experiences.

Workforce Reductions and Strategic Rationale

Earlier in the first quarter of 2025, Meta laid off at least 1,000 employees in its metaverse division. Reports indicate approximate layoffs of 1,500 employees, about 10% of the Reality Labs unit's staff. Additionally, several VR game studios have been closed, and the VR fitness app Supernatural, acquired by Meta in 2023, is reportedly transitioning to maintenance mode, ceasing new content production.

Both the metaverse and AI initiatives are viewed as Meta's pursuit of developing and controlling its own platform, thereby aiming to reduce its dependence on intermediaries like Google and Apple.

Overall Financial Performance

Meta reported revenue of $59.9 billion and a net income of $22.8 billion for the final quarter of 2025.