Meta CEO Mark Zuckerberg leaves the Federal Courthouse in downtown Los Angeles after defending the company in a landmark social media addiction trial in Los Angeles, United States, on February 19, 2026.

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Over a decade ago, Meta – then known as Facebook – hired researchers in the social sciences with the goal of analyzing how the social network’s services were impacting users. It was a way for the company and its peers to show they were serious about understanding the benefits and potential risks of their innovations. 

But as Meta’s court losses this week illustrate, the researchers’ work can become a liability. Brian Boland, a former Facebook executive who testified in both trials — one in New Mexico and the other in Los Angeles — says the damning findings of Meta’s internal research and documents seemingly contradicted how the company portrayed itself in public. Juries in the two trials determined that Meta inadequately policed its site, putting kids in harm’s way. 

Mark Zuckerberg’s company began clamping down on its research teams a few years ago after a Facebook researcher, Frances Haugen, became a prominent whistleblower. The newer crop of tech companies like OpenAI and Anthropic subsequently invested heavily in researchers and charged them with studying the impact of modern AI on users, and publishing their findings. 

With AI now getting outsized attention for the harmful effects it’s having on some users, those companies must ask if it’s in their best interest to continue funding research, or to suppress it. 

“There was a period of time when there were teams that were created internally who could start to look at things and, for a brief window, you had some absolutely outstanding researchers who were looking at what was happening on these products with a little bit more free rein than I understand they have today,” Boland said in an interview.

Meta’s two defeats this week centered on different cases but they had a common theme: The company didn’t share what it knew about its products’ harms with the general public.

Jury members had to evaluate millions of corporate documents, including executive emails, presentations and internal research conducted by Meta’s staff. The documents included internal surveys appearing to show a concerning percentage of teenage users receiving unwanted sexual advances on Instagram. There was also research, which Meta eventually halted, implying that people who curbed their use of Facebook became less depressed and anxious.

Plaintiffs’ attorneys in the cases didn’t rely solely on internal research to make their arguments, but those studies helped bolster their positions about Meta’s alleged culpability. Meta’s defense teams argued that certain research was old, taken out of context and misleading, presenting a flawed view of how the company operates and how it views safety.

‘Both sides of the story’

“The jury got to hear both sides of the story and a very fair presentation of the facts, and they got to make a decision based on what they saw,” Boland said. “And both juries, with very different cases, came back with clear verdicts.”

Meta and Google’s YouTube, which was also a defendant in the L.A. trial, said they would appeal.

Lisa Strohman, a psychologist and attorney who served as an in-house expert consultant for the New Mexico suit, said leaders at Meta and across the tech industry may have thought they could use internal research to their advantage, winning favor from the public.

“I think what they failed to recognize is that researchers are parents and family members,” Strohman said. “And I think that what they failed to realize was that these people weren’t going to be bought.”

Whatever public relations win executives were expecting backfired when the research began to spill out to the public. The most damaging incident for Meta took place in 2021, when Haugen, a former Facebook product manager turned whistleblower, leaked a trove of documents that suggested the company knew of the potential harms of its products.

Frances Haugen, former Facebook employee, speaks during a hearing of the Committee on Energy and Commerce Subcommittee on Communications and Technology on Capitol Hill December 1, 2021, in Washington, DC.

Brendan Smialowski | AFP | Getty Images

Haugen’s “disclosures were a significant turning point globally – not just for the companies themselves but for researchers, policymakers and the broader public,” said Kate Blocker, director of research and program at the nonprofit Children and Screens: Institute of Digital Media and Child Development.

The leaks also led to major changes at Meta and in the tech industry, which began to weed out research that could be viewed as counterproductive for the companies. Many teams studying alleged harms and related issues were cut, CNBC previously reported.

Some companies also began removing certain tools and features of their services that third-party researchers utilized to study their platforms.

 “Companies may now view ongoing research as a liability, but independent, third-party research must continue to be supported,” Blocker said.

Much of the internal research used in this week’s trials didn’t include new revelations, and many of the documents were previously released by other whistleblowers, said Sacha Haworth, executive director of the Tech Oversight Project. What the trials added, Haworth said, were the “the very emails, the very words, the very screenshots, the internal marketing presentations, the memos,” that offered necessary context.

As the tech industry now pushes aggressively into AI, companies like Meta, OpenAI and Google have been prioritizing products over research and safety. It’s a trend that concerns Blocker, who said that, “much like with social media before it, there is limited public visibility into what AI companies are studying about their products.”

“AI companies seem to be mostly studying the models themselves – model behavior, model interpretability, and alignment – but there is a significant gap in research regarding the impact of chatbots and digital assistants on child development,” Blocker said. “AI companies have a chance to not repeat the mistakes of the past – we urgently need to establish systems of transparency and access that share what these companies know about their platforms with the public and support further independent evaluation.”

WATCH: Regulatory pressure to follow after landmark social media verdict.

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Meta CEO Mark Zuckerberg tries on Orion AR glasses at the Meta Connect annual event at the company’s headquarters in Menlo Park, California, U.S., September 25, 2024. REUTERS/Manuel Orbegozo

Manuel Orbegozo | Reuters

Meta‘s deprioritizing virtual reality in favor of artificial intelligence and Internet-connected smart glasses has chilled the industry, leading to concerns about its future.

“I can see how it feels like a VR winter,” said Jessica Young, an independent VR content creator specializing in Horizon Worlds, Meta’s virtual social network.

The social media giant last week laid off 10% of employees who work within its Reality Labs unit, with the cuts centering on VR-related initiatives like the Quest VR headsets, CNBC reported. Teams working on Horizon Worlds were hit hard and some in-house studios were shuttered. Approximately 1,000 jobs were cut, CNBC reported.

The move was part of the company’s effort to redirect Reality Labs investments from VR to AI and wearable devices like the Ray-Ban Meta smart glasses that are co-produced with EssilorLuxottica, a spokesperson for the social media company said in a statement last week. Meta declined to comment further beyond its previous statement.

Meta’s reduced investment in VR is notable considering how much the company has helped grow the industry since its $2 billion acquisition of Oculus in 2014. The company became synonymous with VR when CEO Mark Zuckerberg changed its name from Facebook to Meta, representing the founder’s obsession with a future of digital worlds referred to as the metaverse. Since late 2020, Meta’s Reality Labs division has logged over $70 billion in cumulative losses.

Zuckerberg’s sudden reversal has some VR developers worried about their future prospects. While they said they don’t see Meta killing its VR efforts, a major shift appears to be underway.

Andrew Bosworth, chief technology officer and head of Reality Labs at Meta Platforms Inc., during the Meta Connect event in Menlo Park, California, US, on Thursday, Sept. 18, 2025.

David Paul Morris | Bloomberg | Getty Images

Meta traditionally announces new Quest VR headsets during its annual Connect conference in the fall, but in 2025, the company skimped on VR hardware. Instead, Meta introduced its $799 Meta Ray-Ban Display glasses that contain a single, built-in digital screen.

“If Meta’s not putting out a new headset for another year or two, it’s going to feel stale,” Young said. “It already kind of does.”

Since the layoffs, Meta tech chief Andrew Bosworth has been vocal that the social media giant is not abandoning VR.

“We’re still continuing to invest heavily in this space, but obviously, VR is growing less quickly than we hoped,” Bosworth told tech newsletter Sources. “And so you want to make sure that your investment is right-sized.”

Bosworth this week also circulated a post by Oculus co-founder Palmer Luckey, who on Sunday wrote on X that Meta still employs the “largest team working on VR by about an order of magnitude.”

Although Luckey said that he feels “really bad for the people impacted” by the layoffs, the Reality Labs changes represent “a good thing thing for the long-term health of the industry, especially the ongoing incentives.”

‘The market has spoken’

Market research firm IDC said in a December report that a major transition is occurring in the so-called Extended Reality, or XR, device segment. This category includes VR and so-called mixed-reality headsets that allow users to switch between virtual environments and see their surroundings outside the helmet. The category also counts AI-powered smart glasses and more powerful versions with digital displays.

IDC projects the XR device category to have grown 41.6% year-over-year to 14.5 million units shipped for 2025. But that growth has nothing to do with VR and mixed-reality headsets — those shipments are expected to drop 42.8% to 3.9 million in 2025. The rest of this XR category, which includes AI glasses with and without displays, is projected to grow 211.2% year-over-year to 10.6 million units shipped for 2025.

Jitesh Ubrani, a research manager for market analyst firm IDC, characterized the VR headset market as niche and appealing to only a small segment of video gamers. Average consumers seem uninterested in wearing “big, bulky headsets” for lengthy VR sessions like much of the tech industry hoped for roughly a decade ago, he said.

“The market has spoken,” Ubrani said. “There are certain niche audiences that will continue to use these headsets, but it’s not going to be broadly appealing.”

Visitors experience the new AR+AI glasses flagship product at the XREAL booth at WAIC 2025 in Shanghai, China, on July 27, 2025.

Costfoto | Nurphoto | Getty Images

Andrew Eiche, the CEO of the Google-owned VR gaming studio Owlchemy Labs, said it was always misguided to think VR was on the cusp of having its breakthrough smartphone moment. He called it a “strategic mistake” to compare VR headsets to iPhones

The VR market, Eiche said, more closely resembles old-school Atari video game consoles that were popular before sales crashed during an infamous 1983 gaming market meltdown. It wasn’t until the late 1980s that Nintendo consoles helped revive the market, laying the groundwork for the overall industry to balloon to the massive sector it is today.

“Lot of tech people thought [VR] was going to be instantly amazing, and the same thing’s happening with AI,” Eiche said about the tech industry’s pivot to the latest craze. “When you’re looking at long-term technologies, VR is not going anywhere.”

Still, Eiche said that beyond Meta’s layoffs, other VR studios have also recently downsized as part of a broader video game industry slump. Because Quest is the dominant VR headset on the market, its app store is a key distribution channel for third-party VR.

Making matters worse, Eiche said that Meta’s Horizon Worlds push came at the expense of third-party developers who were trying to find visibility among Quest users.

“We’re at the mercy of Meta,” Eiche said, adding that it “creates a situation where if Meta pulls back, we all pull back.”

Eiche said he’s optimistic that the upcoming Steam Frame wireless VR headset from gaming company Valve will help the market, as well as the recent entries of other devices like the Samsung Galaxy XR, which debuted in October, and Apple’s Vision Pro.

But Apple’s entry into the VR space in February 2024 hasn’t done much to move the needle, and in January, IDC said that Apple’s Chinese manufacturing partner Luxshare stopped producing new Vision Pro headsets, signaling a lack of widespread consumer demand. Still, Ubrani said that Apple’s $3,499 spatial computing headset has found some footing as a business tool.

“Apple did do well in selling to a lot of developers, but they also sold into some very big companies,” Ubrani said.

VR’s hope shifts to the enterprise market

“There were certain quarters where Apple beat Meta in enterprise,” Ubrani said, due in part to the iPhone-maker’s experience selling devices to businesses.

The enterprise VR market may not be as glamorous as its consumer counterpart, but it represents an area where IDC has “seen slow but upwards movement, because companies are realizing that there is great ROI attached with deploying these headsets.”

As part of Meta’s Reality Labs cuts, the company said in a support page that it would end its Horizon managed services program that was for businesses that used Quest headsets for internal tasks like virtual employee trainings.

Meta failed to realize “how big VR could be if they adopted the bigger picture outside of gaming,” said Sean Mann, CEO of the startup RP1, which develops a “metaverse browser” for people to access virtual and augmented reality environments.

As Meta downsizes its VR ambitions and steers Horizon Worlds to be a mobile-focused online gaming platform like Roblox, Young said she plans to keep creating experiences on the platform.

Young has been able to make a living by getting paid by other Horizon developers to create trailers to promote experiences available to users on the service. She’s also earned money from Meta by winning Horizon-related competitions intended to help improve the overall platform.

But Young said she’s less enthusiastic about Horizon’s mobile push, because there was something special about the platform during its earlier, VR-centric years, particularly during the Covid era.

“Horizon became a lifeline for people isolated by the pandemic, disability, age or geography,” she said. “Many users who never imagined themselves as creators, who had no background in art or programming, were inspired by their friends to try.”

But Horizon lost is way, and “what’s frustrating now is watching people declare it dead without ever having experienced or understanding what it was,” Young said.

WATCH: Meta’s Joel Kaplan on AI investments: Our ambition is to build ‘personal superintelligence.’

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In October 2021, Facebook CEO Mark Zuckerberg sent his trillion-dollar social media company into a new direction. Facebook changed its name to Meta and Zuckerberg set his sights on a new horizon, the metaverse.

“There was genuinely a need and a desire at the time for Facebook, the company, to rebrand into something else,” said Leo Gebbie, principal analyst and director at CCS Insight. “The company Facebook wanted to make clear that it was more than just that one social website.”

While the term metaverse predates Facebook, Zuckerberg’s metaverse ambitions have existed inside Meta since 2014, when Facebook bought virtual reality headset developer Oculus and launched Reality Labs. Seven years and a global pandemic later, global video game industry revenue topped $193 billion. Meta — and Wall Street — saw an opportunity to capitalize on an increasing online population, riding in on a virtual reality headset wave.

“There was a bit of a sense in 2020 and into 2021 that this was a technology that was ready, that it was finally going to hit the big time,” says Gebbie. “We’ve had a lot of false dawns in virtual reality in the past.”

In December 2021, Horizon Worlds launched in the U.S. and marked Meta’s entrance into the open world virtual reality platform space. Meta had a short-term goal of 500,000 monthly active users in Horizon Worlds by the end of the year. But its long-term goals were more ambitious. In June 2022, Zuckerberg told CNBC’s Jim Cramer that he expected one billion users by the end of the decade, doing “hundreds of dollars of e-commerce each.”

The company has a very long way to go.

An insider report published by the Wall Street Journal in 2022 found Horizon Worlds was only seeing around 200,000 monthly active users less than a year after launch. And now, three years later, the term metaverse has largely disappeared from the public conversation, with Google Trends noting a sharp fall in searches for the term after 2022.

To make matters worse, Reality Labs is hemorrhaging cash, racking up $58 billion on operating losses since 2020. It’s found some success in augmented reality, however, through it’s AR glasses partnership with Ray-Ban.

Meta didn’t respond to CNBC’s request for comment.

What happened to the metaverse? What exactly is the metaverse? And where is Meta today? Watch the video to learn more.

— CNBC’s Jonathan Vanian contributed to this report.

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