Microsoft is set to lay off 1,000 employees in its mixed reality department. This follows its decision a year ago to make changes to its HoloLens 2 team, which subsequently led to the layoff of 10,000 employees.

Despite the layoffs, Microsoft reiterated its commitment to continuing to sell its HoloLens 2 headset through investment in W365 to the Department of Defense's IVAS program and the broader mixed reality hardware ecosystem.

Analyst QuickTake: Despite the layoffs, Microsoft recently partnered with Meta to create a limited edition Meta Quest VR headset themed around its Xbox game console, indicative of its continued efforts in the XR hardware space. The company also continues its efforts on the Integrated Visual Augmentation System (IVAS), a modified version of the HoloLens 2, geared toward military applications.