Meta Retains Optimism in VR After Reality Labs Loses $83.6 Billion

Meta has reiterated confidence in its virtual reality (VR) business despite its Reality Labs division posting cumulative operating losses of $83.6 billion USD over six years, with executives indicating the financial drag may be nearing a peak.

Reality Labs recorded an operating loss of $19.2B for the 12 months ending Dec 31, 2025, while generating $2.2B in revenue, up 2% year-on-year (YoY), according to Meta’s latest fourth quarter (Q4) and full-year 2025 earnings report. Losses increased 8.3% compared to 2024. Since its formation in 2020, the division has incurred cumulative operating losses of $83.6B, despite generating $11.8B in revenue, with annual deficits continuing to rise.

Annual losses have increased each year: $6.62B in 2020, $10.19B in 2021, $13.71B in 2022, $16.12B in 2023, $17.72B in 2024, and $19.19B in 2025. Reality Labs houses Meta’s virtual and augmented reality (AR) hardware, software, and content operations, including the Quest headset platform and Horizon initiatives.

Meta’s co-founder, and chief executive officer (CEO), Mark Zuckerberg, has described Reality Labs as a long-term investment despite investor discomfort. Speaking on the company’s earnings call, he stated, “I expect Reality Labs losses this year to be similar to last year, and this will likely be the peak as we start to gradually reduce our losses going forward.”

Meta Rebalances Reality Labs Investment Toward Wearables

Meta has carried out layoffs and shut down several internal VR studios, including Sanzaru Games, Twisted Pixel Games, and Armature Studio. Staffing was also reduced at Camouflaj, the developer behind Batman: Arkham Shadow.

Chief financial officer (CFO) Susan Li stated that consumer adoption of VR has generally followed a slower growth path than wearables, prompting a shift in spending priorities. Meta plans to allocate roughly 70% of Reality Labs’ operating expenses to wearables projects such as AI-enabled glasses, with about 30% directed toward VR and Horizon-related efforts, including Meta Quest hardware and software.

The strategy is underpinned by Meta’s broader financial performance, with the company reporting $200.97B in revenue for full-year 2025. Operating income totaled $83,276B, giving Meta the financial capacity to continue funding long-term technology bets.

While Reality Labs remains unprofitable, Meta’s leadership says tighter investment discipline could help stabilize losses. A greater focus on wearables is expected to support that effort while maintaining the company’s presence in VR and immersive computing.