Meta is preparing to cut about 1,500 jobs from its Reality Labs division, while the company increases spending on artificial intelligence and massive data centers. The layoffs could be announced as early as Tuesday and are expected to affect about 10 percent of the unit’s workforce, according to a New York Times report citing people familiar with the matter. Reality Labs currently employs approximately 15,000 people.

Reality Labs is responsible for Meta’s virtual and augmented reality products and platforms. The division began as Oculus, a VR headset startup founded by Palmer Luckey and funded via Kickstarter, before being acquired by Facebook in 2014. Over the years, it evolved into Meta’s hub for VR and AR hardware and software, including headsets, Ray-Ban smart glasses, and the Horizon Worlds platform, which once played a central role in the company’s Metaverse ambitions.

The reported layoffs come alongside internal developments that have heightened unease within the team. The New York Times says Meta’s chief technology officer Andrew Bosworth called an all-hands meeting for Reality Labs employees on Wednesday, calling it the “most important” meeting of the year. Staff members have reportedly been asked to appear in person. The meeting is expected to take place a day after the job cuts were made public.

Concerns about the future of Reality Labs have persisted for months. Last month, Gizmodo journalist James Perrow wrote that a planned 30 percent cut to the division’s budget pointed to a clear shift in the way Meta allocates money and attention. Although this did not immediately end the metaverse effort, the move suggested that other areas were now taking priority.

This week that direction became clear. On Monday, Meta announced an aggressive expansion of its data center footprint under a new initiative called Meta Compute. The company said it plans to create “tens of gigawatts” of AI compute capacity before the end of the decade. In practical terms, this would mean data centers receiving power equivalent to that consumed by several large cities, which highlights just how big Meta’s AI ambitions have become.

Meta also announced a senior leadership appointment on the same day. Dina Powell McCormick, a longtime banking executive and former advisor to U.S. Presidents George W. Bush and Donald Trump, will join Meta as president and vice president. The appointment is expected to help the company manage policy, government relations and partnerships as it pursues large infrastructure projects.

Mark Zuckerberg, CEO of Meta, described pursuing AI infrastructure as a strategic vision, saying, “How we engineer, invest, and partner to build this infrastructure will become a strategic advantage.” He used similar language when defending heavy spending on metaverse technology in 2022, arguing at the time that building new types of experiences would strengthen the company in the long run.

Reality Labs employees are now focused on what’s next. If the reported cuts go ahead, they will fuel a growing sense that Meta is reworking its priorities, with AI taking center stage, while its once-dominant metaverse unit faces a more uncertain future.