Virtual reality headsets have gotten off to a strong start this decade, driven by strong sales of the Meta Quest 2 (opens in new tab), and virtual reality has shed its niche reputation and become known in many homes. However, VR's big breakthrough is likely to come to a halt in 2022.

According to IDC's VR and AR Tracker (open in new tab), headset shipments will reach 8.8 million units in 2022, down 20.9% from 2021.

This is not an entirely surprising statistic considering the world we live in today and the past few years: revenue at Reality Labs, Meta's VR and AR division, surged 127% (open in new tab) in 2020. This surprising surge is likely to be strongly related to the doorstep measures taken by the Covid-19 pandemic.

Between 2020 and 2021, Reality Lab's revenues increased another 99%.

Between 2021 and 2022, however, Reality Lab shrank by about 5% (opens in new tab) [PDF]. Meta released Quest Pro last year and is busy developing Quest 3, which will be released this year (opens in new tab). However, the overall VR market as a whole appears to have slowed down, exacerbating the slump in shipments, as demand more generally has slowed.

Meta has been dominant in VR headset sales; the Steam Hardware Survey (opens in new tab) estimates Meta's dominance of the PC VR user base on Steam at 44.7%. And IDC suggests that Meta holds nearly 80% market share in VR and AR overall.

According to IDC, the second-largest share of 10% is held by ByteDance, the developer of TikTok, with its Pico headset.

But even the drop in demand against the highs of 2020 and 2021 is not that worrisome for VR in the long run. Most technologies have experienced similar downturns since the closed and strange times, and VR and AR are still on the rise as more and more major companies seek to enter the market. These include Sony, which has announced the PS VR2, and Apple, which is rumored to be launching its own VR/AR headset.