Meta Platforms Inc. (NASDAQ:META) shares slid 2.5% on Wednesday, weighing on communication services and technology ETFs, as the company once again revised its long-term strategy by further backing away from the metaverse and redirecting resources toward AI and wearables.
The dip came as a result of reports that Meta is planning to cut 10% or more of jobs in its Reality Labs division. This unit houses its virtual reality and metaverse initiatives, and employs about 15,000 workers. According to The New York Times, the layoffs could be rolled out as early as this week, with Chief Technology Officer Andrew Bosworth holding what is being called the “most important” internal meeting of the year.
For investors, Wednesday’s selloff reflected a shock that Meta’s metaverse ambitions have been expensive and elusive, given the ongoing retrenchment at Reality Labs.
Meta’s decline spilled over into ETFs where the stock holds significant weight, including the Communication Services Select Sector SPDR Fund (NYSE:XLC) and the Vanguard Communication Services ETF (NYSE:VOX). Both funds ended in the red on Wednesday. Broad technology funds with significant Meta exposure also came under pressure, underscoring how strategy shifts at mega-cap constituents can quickly affect ETF performance.
The renewed retreat from virtual reality further clouds the outlook for metaverse-themed ETFs such as the Roundhill Ball Metaverse ETF (NYSE:METV), which have struggled amid slowing hardware demand and fading investor enthusiasm. Conversely, Meta’s increased focus on artificial intelligence could support AI-focused as well as innovation-focused ETFs if the spending pivot delivers clearer monetization, offering a reminder that in ETF land, one company’s strategic reset can redraw an entire theme.
What Happened?
Although in the past, cost discipline has been something of a positive for markets, this round of potential cuts in jobs spooked investors because it brought to the fore how sharply Meta is rethinking its once-flagship metaverse strategy.
Reality Labs, the affected unit, has incurred about $73 billion in losses since 2021, according to The Street, including a $4.43 billion operating loss in the third quarter of 2025 alone. Shipment data revealed by market research firm IDC and cited in The Register added to the unit’s woes, with only 1.7 million Quest headsets shipped in the first three quarters of 2025, a 16% year-over-year decline.
The company is reportedly shifting funding from virtual reality to wearables such as smart glasses and wrist-based devices, while also doubling down on next-generation AI amid intense competition from OpenAI, Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL), and Microsoft Corp. (NASDAQ:MSFT). Meta has already cut jobs across both its VR and AI units over the past year, including reductions at Oculus Studios and a restructuring that eliminated around 600 AI roles in October 2025.
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