The metaverse era at Meta is getting expensive to unwind. According to Reuters, the company is planning layoffs that could affect 20% or more of its workforce, with Reality Labs - the division that once symbolized Mark Zuckerberg's bet on virtual reality - taking the deepest cuts.
Reality Labs faces 10-15% staff reductions, roughly 1,500 employees at the Menlo Park headquarters alone. Over 270 California workers have already been confirmed for cuts. Internal reports suggest Meta is looking at reducing total headcount by at least one-third over three years, a restructuring that dwarfs the 2023 "year of efficiency" layoffs.
The AI Pivot Is Eating the Budget
The layoffs are directly tied to Meta's aggressive push into AI infrastructure. The company has been in a bidding war for AI talent while simultaneously pouring billions into the compute power needed to train and run large models. That spending has to come from somewhere, and Reality Labs' operating costs are being targeted for a 30% reduction.
There's an awkward wrinkle here: Meta's next major AI model, internally codenamed Avocado, has been delayed by at least two months after falling short of competitors in performance testing. So Meta is spending more to catch up while also cutting staff to pay for it.
What This Means for the AI Tool Market
Meta is one of the largest contributors to open-source AI. Its LLaMA model family powers hundreds of startups and tools. If these cuts redirect more resources toward AI development rather than away from it, the open-source community could actually benefit from a more focused Meta. But if the financial pressure leads to belt-tightening on open-source releases, a lot of smaller companies building on LLaMA-based models will feel the squeeze.
The broader pattern is clear: big tech companies are realizing that competing in AI requires the kind of sustained capital spending that makes Wall Street nervous. Google, Microsoft, and Amazon are all navigating the same tension. Meta's answer is to fund AI by shrinking everything else.