Meta's Reality Labs division reported a $4.6 billion loss in the second quarter of 2026, raising cumulative losses since the end of 2020 to approximately $88 billion, according to Meta's earnings report.
This follows a $4 billion loss in Q1 2026 and persists despite Meta reducing its virtual reality initiatives earlier this year, including moving its main VR app, Horizon Worlds, into maintenance mode. Reality Labs generated $402 million in revenue in Q1 and $431 million in Q2.
Meta reported an overall profit of $15.8 billion in Q2, a decrease of approximately 13% year over year.
Reality Labs Losses Continue After VR Retrenchment
Meta eliminated hundreds of positions from Reality Labs and placed Horizon Worlds into maintenance mode after the division reported a $6 billion loss in January, bringing total losses since Q4 2020 to $80 billion at that time.
While quarterly losses have decreased, they continued with $4 billion lost in Q1 2026 and $4.6 billion in Q2, raising the cumulative total to approximately $88 billion.
The Q2 earnings report emphasizes Meta's AI and smart glasses initiatives, with Reality Labs losses reported alongside these priorities. The data suggests Meta has shifted focus toward AI but remains involved in shared virtual reality.
Mark Zuckerberg previously justified significant metaverse investments by projecting the sector could be worth trillions by 2030. A 2023 Meta-commissioned report estimated that virtual reality headsets used for work and recreation could add $760 billion to US GDP by 2035.
Meta shifted its focus to generative AI, resulting in job reductions and moving Horizon Worlds into maintenance mode.
Meta’s AI and Smart Glasses Strategy
During the earnings call, Zuckerberg expressed optimism about AI and smart glasses, highlighting the recent launch of Muse image and video generation tools and plans to monetize AI through subscriptions.
CFO Susan Li stated that Meta's AI-powered algorithms are increasing social media adoption. These developments occur as Meta faces lawsuits in 40 US states alleging its role in a teen mental health crisis.
The newly released Meta Glasses are the first to feature Muse AI by default. Ongoing privacy concerns regarding camera-equipped glasses continue to impact the market, and reports that this controversy led Apple to delay its own smart glasses until it can ensure user safety.
Meta has not disclosed a timeline for when Reality Labs may reduce losses or achieve profitability, nor has it outlined a future roadmap for Horizon Worlds beyond its current maintenance mode.
It is also unclear how much of Reality Labs' ongoing spending is allocated to smart glasses hardware versus virtual reality, as Meta reports the division's results as a single figure. Additional details may be provided in future earnings reports.
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