Meta just dropped a bombshell that has the VR gaming community reeling. On January 13, 2026, the tech giant confirmed it’s shutting down three major VR game studios – Twisted Pixel Games, Sanzaru Games, and Armature Studio – as part of sweeping layoffs hitting roughly 10% of its Reality Labs division. These weren’t just any studios. They were responsible for some of the biggest VR titles on Meta Quest, including Deadpool VR, Asgard’s Wrath 2, and Resident Evil 4 VR.
The closures come as Meta shifts its strategy away from the metaverse toward artificial intelligence and wearable technology. A Meta spokesperson confirmed the decision, stating they’re “shifting some of our investment from Metaverse toward Wearables” and plan to “reinvest the savings to support the growth of wearables this year.”
The Studios That Built VR Gaming
Each of these shuttered studios had a rich history that made their closure particularly painful for fans. Twisted Pixel Games first gained fame during the Xbox 360 era with beloved Xbox Live Arcade hits like Splosion Man (2009) and Ms. Splosion Man (2011). The studio became part of Microsoft Studios in 2011 before going independent again in 2015 to focus on VR development. Their most recent release, Marvel’s Deadpool VR, launched in November 2025 – just two months before the studio was shut down.
Sanzaru Games made waves in the VR world with the critically acclaimed Asgard’s Wrath series. Their sequel, Asgard’s Wrath 2, was the flagship title bundled with Meta Quest 3 at launch in 2023, earning a 9.4 score from IGN for its ambitious 90-plus hour open-world RPG experience. Meta acquired Sanzaru in February 2020, clearly seeing the studio as central to its VR ambitions.
Armature Studio, known for porting Resident Evil 4 to VR, was only acquired by Meta in late 2022. The studio barely had four years under Meta’s ownership before being shuttered, raising questions about the company’s commitment to its acquisitions.
What Went Wrong at Meta
The studio closures aren’t happening in a vacuum. Meta’s Reality Labs division, which oversees VR and mixed reality efforts, has hemorrhaged more than $60 billion since 2020 as CEO Mark Zuckerberg bet heavily on the metaverse. That gamble hasn’t paid off the way the company hoped.
Now Meta is racing to catch up in the AI space, where it lags behind competitors like OpenAI and Google. The company raised its projected 2025 capital spending to between $70 billion and $72 billion, with even larger increases expected in 2026 – but that money is flowing toward AI, not VR. In June 2025, Meta reportedly spent $14.3 billion to bring in Scale AI founder Alexandr Wang to lead AI strategy. By October, Vishal Shah, who previously oversaw metaverse efforts, became vice president of AI products instead.
Impact on Affected Developers
The human cost of these closures is significant. Designer Andy Gentile posted on LinkedIn that he’d been laid off, writing “It appears the entire Twisted Pixel games studio has been shut down. Sanzaru Games, too.” Ray West, a senior level designer at Sanzaru, confirmed on LinkedIn that “several Meta game studios were closed today, including Sanzaru.”
One former Twisted Pixel designer reflected on the loss: “It was an honor to work alongside you for 3.5 years and ship Marvel’s Deadpool VR. We made something really special together and no one can ever take that away.” These weren’t just job losses – they represented the end of teams that had spent years building expertise in VR game development.
What This Means for VR Gaming
Meta’s pivot away from VR game development leaves a massive hole in the Quest ecosystem. The three shuttered studios were responsible for some of the platform’s most polished, high-budget experiences. Without them, Meta will likely rely more heavily on third-party developers and smaller indie titles.
According to reporting, Meta isn’t completely abandoning VR – the company is reportedly courting developers who build games for Roblox to create experiences for Horizon Worlds instead. Industry analyst Ben Hatton suggested Meta might be “moving it towards mobile as mobile gaming has become very popular over the last five years or so.”
But shifting focus from premium VR titles to mobile-style experiences represents a significant downgrade in ambition. Games like Asgard’s Wrath 2 demonstrated that VR could deliver sprawling, console-quality experiences. Now it seems Meta is more interested in bite-sized social experiences that require less investment.
FAQs
Why did Meta shut down Twisted Pixel and Sanzaru Games?
Meta closed these studios as part of a strategic shift away from the metaverse and VR gaming toward artificial intelligence and wearable technology. The Reality Labs division has lost over $60 billion since 2020, prompting the company to cut costs and redirect investment.
What games did these studios create?
Twisted Pixel developed Marvel’s Deadpool VR, Splosion Man, and Ms. Splosion Man. Sanzaru Games created the Asgard’s Wrath series for VR. Armature Studio ported Resident Evil 4 to VR for Meta Quest.
How many people lost their jobs in these closures?
Meta laid off approximately 10% of its Reality Labs division, affecting more than 1,000 employees. The exact number from the three studio closures hasn’t been disclosed, but multiple developers confirmed entire teams were let go.
Will Meta continue making VR games?
Meta says it isn’t abandoning VR entirely but is shifting focus toward wearables and courting third-party developers. The company appears to be moving away from funding large-scale, AAA VR game development in favor of smaller experiences and social platforms like Horizon Worlds.
When were these studios acquired by Meta?
Sanzaru Games was acquired in February 2020, while both Armature Studio and Twisted Pixel were acquired in late 2022. The short ownership period, especially for Armature and Twisted Pixel, made the closures particularly surprising.
What happens to games like Asgard’s Wrath 2 now?
Existing games from these studios will likely remain available for purchase and play on Meta Quest platforms. However, future updates, DLC, or sequels are now uncertain without the original development teams.
Is this part of broader gaming industry layoffs?
Yes, the gaming industry has seen massive layoffs throughout 2024-2026. Microsoft previously shut down studios like Tango Gameworks and Arkane Austin in 2024, and The Initiative in 2025. The Meta closures continue this troubling trend.
Looking Ahead
The closure of these three studios marks a turning point for VR gaming. Meta was one of the few companies investing heavily in high-quality, exclusive VR content. With that investment drying up, the future of premium VR experiences looks uncertain. While Meta insists it’s not abandoning VR entirely, actions speak louder than words. Shutting down the teams behind your biggest VR successes sends a clear message about where the company’s priorities lie – and right now, that’s AI and wearables, not virtual reality gaming.
For the developers affected, the road ahead won’t be easy in an industry already struggling with widespread layoffs. But the talent that created games like Asgard’s Wrath 2 and Deadpool VR won’t disappear. Wherever these developers land next, the VR gaming community will be watching to see what they create.