Cloudhead Games has confirmed a major round of layoffs, cutting around 70% of its workforce. The changes take effect on January 7. The news was shared in a public social media post by CEO Denny Unger, who described the studio’s situation as an “impossible position”.
According to Unger, the decision came after months of pressure. He pointed to a lack of platform funding in the VR space. He also cited slow mainstream adoption and the wider downturn across the games industry. Together, these issues left the studio with few realistic options.
Cloudhead Games CEO’s emotional message and an uncertain VR future
Unger’s message focused heavily on the people leaving the studio. He described them as dedicated professionals who helped shape a caring and supportive culture. He also encouraged other developers to reach out, sharing a “reverse recruiting” spreadsheet to help staff find new roles.
Despite the layoffs, Cloudhead Games says its belief in VR has not changed. Unger acknowledged a sharp drop in investment across VR hardware and software. Even so, he stressed that VR still has long-term potential as a mainstream medium.
Cloudhead Games has spent 14 years working in virtual reality. Its past projects include Pistol Whip, Aperture Hand Lab with Valve, and The Gallery series. The studio is also working on an unannounced game.
This marks one of the first major layoffs of 2026. With the industry still struggling, it may not be the last.
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