Roblox shares plummeted 18% on Friday after the company reported first-quarter earnings as its new child safety measures weighed on bookings.

“Part of what we’re rolling out with age check, we believe, is the real, right long-term way to build this platform,” CEO David Baszucki said Friday on CNBC’s “Squawk Box.”

In a letter to shareholders, the gaming company wrote that its new age-check feature “restricted on-platform communication for non-age checked users, diluted communication for age-checked users, and slowed new user acquisition,” causing greater-than-expected headwinds.

In January, the company restricted its chat feature to users who completed its age-check verification. According to the company, 73% of age-checked daily active users on Roblox were under 18, with 35% under 13 as of Jan. 31.

To account for the slowed growth, Roblox slashed its full-year 2026 guidance.

The company updated its full-year 2026 bookings to fall between $7.33 billion and $7.6 billion. It forecasted 2026 bookings to be almost $1 billion higher last quarter, falling between $8.28 billion and $8.55 billion.

“While our aggressive push to enhance safety lowers our expectations for topline growth in 2026, it makes our platform fundamentally better and amplifies the long-term growth potential of Roblox through more effective content targeting, tailored communication experiences, and improved community sentiment,” the company wrote in its letter to shareholders.

Roblox’s first-quarter results beat Wall Street’s estimates, with a loss of 35 cents per share beating the estimated loss of 41 cents per share. It reported $1.73 billion in revenue for the quarter, narrowly beating analysts’ estimates of $1.72 billion.

Roblox is facing over 140 lawsuits in U.S. Federal Court accusing the company of failing to protect children from sexual exploitation, according to Reuters. Last month, the company reached settlements with Alabama and West Virginia, agreeing to pay out a combined $23.2 million.

The company announced new account types for younger age groups last month, as well as expanded parental controls.

Governments around the world are making efforts to crack down on teen social media use amid mounting evidence of potential harms, but critics argue blanket bans are an ineffective quick fix.

Australia became the first country to enforce a sweeping social media ban for under-16s in December, requiring platforms like Meta’s Instagram, ByteDance’s TikTok, Alphabet’s YouTube, Elon Musk’s X, and Reddit to implement age verification measures or face penalties.

Several European countries are now looking to follow Australia’s lead, with the U.K., Spain, France, and Austria drafting their own proposals. Although a national ban in the U.S. looks unlikely, state-level legislation is underway.

It comes after Meta, the parent company of Facebook, Instagram and Threads, faced two separate defeats in trials related to child safety and social media harms in March.

A Santa Fe jury found Meta misled users about child safety on its apps. The next day, a Los Angeles jury ruled that Meta and YouTube designed platform features that contributed to a plaintiff’s mental health harms.

These developments are set to “unleash a lot more legislation,” Sonia Livingstone, social psychology professor and director of the London School of Economics’ Digital Futures for Children center, told CNBC.

However, Livingstone said a social media ban for teens is a slapdash solution from governments that have failed to properly police tech giants for years.

“I think the argument for a ban is an admission of failure that we cannot regulate companies, so we can only restrict children,” she said, explaining that the U.S. and Europe already have a lot of legislation in the books that isn’t being enforced.

“When are governments really going to enforce, raise the stakes on fines, ban the companies if necessary for not complying,” she added.

Many Australian teens flouted the social media ban when it first came into force in December. A BBC report found that downloads of VPNs, which hide users’ locations to avoid country-specific restrictions, increased before the ban.

Additionally, downloads of some apps that weren’t yet affected such as Lemon8, Yope and Discord also surged in the days after the law came into effect, per the report.

“I think it [a ban] certainly gets rid of all the harmful aspects, but it gets rid of the good ones too and I’m just not yet sure if that’s proportionate,” Nash added.

For the last three decades, internet giants have been able to avoid legal exposure for content on their platforms, thanks to a law that differentiates the companies from online publishers. But those safeguards appear to be weakening.

Meta and Google, which dominate the U.S. digital ad market, find themselves as defendants in a host of lawsuits that collectively serve to undermine the long-held notion that they have legal protection for what surfaces on their sites, apps and services. Companies like TikTok and Snap are in the same predicament.

The unifying aspect of the recent cases is that they’re crafted to circumvent Section 230 of the Communications Decency Act, which Congress passed in 1996 and President Bill Clinton signed into law. Established in the early days of the internet, the law protects websites from being sued over content posted by their users, and allows them to act as moderators without being held liable for what stays up.

Last week, a jury in New Mexico found Meta liable in a case involving child safety, while jurors in Los Angeles held the Facebook parent and Google’s YouTube negligent in a personal injury trial. Days after those verdicts were revealed, victims of the notorious sex offender Jeffrey Epstein filed a class action lawsuit against Google and the Trump administration over allegations related to the wrongful disclosure of personal information.

In that complaint, the plaintiffs argue that Google’s AI Mode, which serves up AI-powered summaries and links, is “not a neutral search index,” a clear effort to make the case that Google isn’t just a platform sitting between users and the information they seek.

“The plaintiffs’ bar is winning the war against section 230 through systematic, relentless litigation that is causing there to be divots and chinks in its protection,” said Eric Goldman, a law professor at Santa Clara University School of Law, in an interview.

The stakes are massive as the technology sector exits the era of traditional online search and social networking and enters a world defined by artificial intelligence, where models designed by the owners of the largest platforms are serving up conversational chats, pictures and videos that can range from controversial to potentially illegal. The financial penalties to date have been minimal — less than $400 million in damages between the two verdicts last week — but the cases establish a troubling precedent for tech giants that are betting their future on AI.

“For so long, tech companies have used Section 230 as an excuse to avoid taking meaningful action to protect users, but especially kids from egregious harms, harassment and abuse, frauds and scams,” Sen. Brian Schatz (D-Hawaii) said in March during a U.S. Senate Commerce Committee hearing tied to the 30th anniversary of Section 230. “It’s not that they don’t know what’s happening or even why it’s happening. It’s that to do something about it would be to hurt their bottom line. And so long as federal law provides a shield, why even bother?”

Meta declined to comment for this story. Google didn’t respond to a request for comment. Both companies said they plan to appeal last week’s verdicts.

President Donald Trump, during his first term in office, supported greater restrictions on social media companies for what he viewed as their bias against him. And Joe Biden, when he was a presidential hopeful in 2020, told The New York Times editorial board that Section 230 “should be revoked” for tech platforms including Facebook, which he said was “propagating falsehoods they know to be false.”

Nadine Farid Johnson, policy director of the Knight First Amendment Institute at Columbia University, said about legislative efforts that “none of those things have fully come to fruition, in part because they are such complicated questions.”

But while the issue has stagnated in Washington, D.C., plaintiff attorneys are finding other routes toward holding big tech companies accountable.

The verdict last week against Meta and YouTube was the first time a jury found social media platforms liable for what plaintiff attorneys alleged was intentionally engineering addiction in minors with their products. The case went after how the platforms were designed, not just what content they carried.

Plaintiffs argued that the combination of features like autoplay, recommendation algorithms, notifications and certain filters acted like “digital casinos,” leading to serious mental health problems for a young girl who claimed she couldn’t stop using the apps.

The class action suit against Google, filed last week by a plaintiff with the pseudonym Jane Doe, alleged that the company’s AI Mode created its own summaries and links, exposing Epstein victims’ personal identifying information (PII), including names, phone numbers and email addresses.

Kevin Osborne, the plaintiff’s attorney in the case, told CNBC in an interview that the suit was filed after Google declined a request to take down the victims’ contact information from AI mode. Osborne said the case has to move quickly because of how fast the information is spreading.

“We filed when we filed because we needed to act as soon as possible to get this stuff taken down,” said Osborne, a partner at Erickson Kramer Osborne in San Francisco. “People are getting calls from total strangers and death threats. It’s a nightmare.”

Osborne added that the timing was “serendipitous” given Meta’s court defeats last week, but he said there’s overlap in that they all involve efforts by the plaintiffs to skirt Section 230. Osborne said that in his case, “this is AI mode coming up with its own content and that’s something that’s not been explored very thoroughly by the courts.”

Matthew Bergman, one of the lawyers representing the plaintiffs in the Los Angeles case, testified before a Senate committee in March and said the tech industry has relied on overly broad interpretations of Section 230 in order “to evade all possible legal accountability simply because third-party content is found somewhere in the causal chain of their misconduct.”

Bergman said he looked closely at a 2021 ruling in an appeals court involving allegations about the role a Snapchat feature played in a fatal car crash. The court reversed an earlier decision to dismiss the case under Section 230, citing the plaintiff’s allegations that Snap’s negligent design incentivized young people to drive recklessly.

“I charted a very narrow legal theory that might legally permit certain cases brought by parents to proceed despite Section 230,” Bergman told lawmakers.

The evidence presented in Los Angeles bolstered the plaintiff’s arguments that Meta and YouTube executives knew of their products’ design harms and failed to adequately address them. At a press briefing about the case on Monday, Bergman said “the best way to prove our case is through their own documents.”

In the Google AI Mode suit, the plaintiff also pointed to design flaws related to the public display of personal information.

“Google is intentionally furnishing that PII in a way designed, or at least substantially certain, to fuel harassment and fear,” the suit says.

Osborne expanded on that idea.

“Google didn’t just provide our client’s email address,” he said. “They created a link, so when you’re reading the content, looking at AI mode, all you’ve got to do is click a button and you’ve generated an email directly to the [Epstein] survivor.”

It’s not the first time Google has been sued for how its AI interacted with users, an issue that’s also created legal challenges for ChatGPT creator OpenAI.

Earlier In March, the father of Jonathan Gavalas filed a lawsuit against Google, accusing the Gemini chatbot of convincing his son to carry out a series of missions, including staging a “catastrophic accident.” The younger Gavalas then committed suicide at the instruction of Gemini, the lawsuit alleges.

And in January, Google settled with families who sued the company and Character.AI, alleging their technology caused harm to minors, including suicides. Last year OpenAI was sued by a family who blamed ChatGPT for their teenage son’s death by suicide.

If you are having suicidal thoughts or are in distress, contact the Suicide & Crisis Lifeline at 988 for support and assistance from a trained counselor.

WATCH: More litigation to come following Meta ruling, says Harvard Law professor.

U.K. regulators are calling on social media giants to enforce stricter protection for children on their platforms after a blanket ban for under-16s was rejected by lawmakers.

Online safety organizations Ofcom and the Information Commissioner’s Office said they had written to YouTube, TikTok, Facebook, Instagram, and Snapchat on Thursday, urging them to tackle a broad range of child safety issues, from implementing stringent age verification measures to tackling child grooming on their platforms.

It comes after U.K. lawmakers voted against a proposal to include a social media ban for under-16s in the a piece of child welfare legislation being debated earlier this month.

The U.K. government has launched a consultation on children’s social media use to gather views of parents and young people on whether a social media ban would be effective.

Governments across Europe are weighing stricter regulations to limit teens’ use of social media after Australia became the first country to enforce a sweeping ban for under-16s in December. Spain, France, and Denmark are among the countries weighing similar measures.

TikTok says its rolled out enhanced technologies across Europe since January to detect and remove accounts that belong to anyone under its minimum age requirement of 13, with the help of specialist moderators.

It also utilizes facial age estimation, credit card authorization, or government-approved identification to confirm users’ ages, the company said.

Snapchat is investing and working on its safety efforts, a spokesperson from the company told CNBC in emailed comments.

“We strongly support app store-level age verification – a consistent, industry-wide solution applied at the point of download, rather than patchwork checks by individual platforms,” they added.

YouTube did not immediately respond to requests for comment from CNBC.

New U.S laws designed to protect minors are pulling millions of adult Americans into mandatory age-verification gates to access online content, leading to backlash from users and criticism from privacy advocates that a free and open internet is at stake. Roughly half of U.S. states have enacted or are advancing laws requiring platforms — including adult content sites, online gaming services, and social media apps — to block underage users, forcing companies to screen everyone who approaches these digital gates.

“There’s a big spectrum,” said Joe Kaufman, global head of privacy at Jumio, one of the largest digital identity-verification and authentication platforms. He explained that the patchwork of state laws vary in technical demands and compliance expectations. “The regulations are moving in many different directions at once,” he said.  

Social media company Discord announced plans in February to roll out mandatory age verification globally, which the company said would rely on verification methods designed so facial analysis occurs on a user’s device and submitted data would be deleted immediately. The proposal quickly drew backlash from users concerned about having to submit selfies or government IDs to access certain features, which led Discord to delay the launch until the second half of this year.

“Let me be upfront: we knew this rollout was going to be controversial. Any time you introduce something that touches identity and verification, people are going to have strong feelings,” Discord chief technology officer and co-founder Stanislav Vishnevskiy wrote in a Feb. 24 blog post.

Websites offering adult content, gambling, or financial services often rely on full identity verification that requires scanning a government ID and matching it to a live image. But most of the verification systems powering these checkpoints — often run by specialized identity-verification vendors on behalf of websites — rely on artificial intelligence such as facial recognition and age-estimation models that analyze selfies or video to determine in seconds whether someone is old enough to access content. Social media and lower-risk services may use lighter estimation tools designed to confirm age without permanently storing detailed identity records.  

Vendors say a challenge is balancing safety with how much friction users will tolerate. “We’re in the business of ensuring that you are absolutely keeping minors safe and out and able to let adults in with as little friction as possible,” said Rivka Gerwitz Little, chief growth officer at identity-verification platform Socure. Excessive data collection, she added, creates friction that users resist. 
 
Still, many users perceive mandatory identity checks as invasive. “Having another way to be forced to provide that information is intrusive to people,” said Heidi Howard Tandy, a partner at Berger Singerman who specializes in intellectual property and internet law. Some users may attempt workarounds — including prepaid cards or alternative credentials — or turn to unauthorized distribution channels. “It’s going to cause a piracy situation,” she added. 

Where adult data goes 

In many implementations, verification vendors — not the websites themselves — process and retain the identity information, returning only a pass-fail signal to the platform. 

Gerwitz Little said Socure does not sell verification data and that in lightweight age-estimation scenarios, where platforms use quick facial analysis or other signals rather than government documentation, the company may store little or no information. But in fuller identity-verification contexts, such as gaming and fraud prevention that require ID scans, certain adult verification records may be retained to document compliance. She said Socure can keep some adult verification data for up to three years while following applicable privacy and purging rules.  

Civil liberties’ advocates warn that concentrating large volumes of identity data among a small number of verification vendors can create attractive targets for hackers and government demands. Earlier this year, Discord disclosed a data breach that exposed ID images belonging to approximately 70,000 users through a compromised third-party service, highlighting the security risks associated with storing sensitive identity information. 

In addition, they warn that expanding age-verification systems represent not only a usability challenge but a structural shift in how identity becomes tied to online behavior. Age verification risks tying users’ “most sensitive and immutable data” — names, faces, birthdays, home addresses — to their online activity, according to Molly Buckley, a legislative analyst at the Electronic Frontier Foundation.  “Age verification strikes at the foundation of the free and open internet,” she said.

Even when vendors promise to safeguard personal information, users ultimately rely on contractual terms they rarely read or fully understand. “There’s language in their terms-of-use policies that says if the information is requested by law enforcement, they’ll hand it over. They can’t confirm that they will always forever be the only entity who has all of this information. Everyone needs to understand that their baseline information is not something under their control,” Tandy said. 

As more platforms route age checks through third-party vendors, that concentration of identity data is also creating new legal exposure for the companies that rely on them. “A company is going to have some of that information passing through their own servers,” Tandy said. “And you can’t offload that kind of liability to a third party.” 

Companies can distribute risk through contracts and insurance, she said, but they remain responsible for how identity systems interact with their infrastructure. “What you can do is have really good insurance and require really good insurance from the entities that you’re contracting with,” she said. 

Tandy also cautioned that retention promises can be more complex than they appear. “If they say they’re holding it for three years, that’s the minimum amount of time they’re holding it for,” she said. “I wouldn’t feel comfortable trusting a company that says, ‘We delete everything one day after three years.’ That is not going to happen,” she added. 

Legal battles are not over

Federal and state regulators argue that age-verification laws are primarily a response to documented harms to minors and insist the rules must operate under strict privacy and security safeguards. 

An FTC spokesperson told CNBC that companies must limit how collected information is used. While age-verification technologies can help parents protect children online, the agency said firms are still bound by existing consumer protection rules governing data minimization, retention, and security. The agency pointed to existing rules requiring firms to retain personal information only as long as reasonably necessary and to safeguard its confidentiality and integrity. 

According to Rae Pickett, a spokesperson from the Virginia attorney general’s office — one of the states that has been actively enforcing age-verification laws — officials view strong verification and data-handling standards as inseparable parts of protecting young users and ensuring age-appropriate online experiences. She pointed to litigation against Meta and TikTok as evidence that inadequate safeguards can expose young users to harmful content and experiences. Under the Virginia law, companies collecting verification data cannot use it for purposes beyond age determination and must maintain security practices appropriate to the sensitivity of the information under the state’s Consumer Data Protection Act. 

However, Virginia’s effort suffered a legal setback when a federal court at least temporarily blocked enforcement of its law last week, siding with a First Amendment challenge brought by a trade group representing major social media companies. Virginia Attorney General Jay Jones said in a statement to CNBC after the court decision that the AG’s office “will use every tool available to us to ensure that Virginia’s children are protected from the proven harms of unlimited access to these addictive feeds. We look forward to being able to fully enforce the law to keep families safe.”

Buckley says legislators do not need to sacrifice their constituents’ First Amendment rights and privacy to make a safer internet and address many of the harms these proposals seek to mitigate. In fact, according to the EFF analyst, many lawmakers have recognized these approaches, such as data minimization, in existing age-verification proposals. But if legislators want to meaningfully improve online safety instead of building new systems of surveillance, censorship, and exclusion, she said they should pass a strong, comprehensive federal privacy law that protects and empowers all internet users to control how our data is collected.

‘A permanent feature of online life’

In some countries, age verification laws may already require platforms to use methods like facial age estimation or ID checks, including in the UK, Australia, and soon in Brazil.

Major platforms based in the U.S. are staking out positions on how age verification should be implemented, though not without controversy, as the Discord example suggests, and coming after years of lawsuits alleging weak efforts to keep their sites safe for children. 

Discord said in explaining its delayed global rollout that other than in countries where national laws require certain methods of verification, over 90% of users will never need to verify their age by any methods other than its existing internal safety systems that do not require user action. Though its CTO noted in the recent blog post, “We know many of you believe the right answer is not to do this at all.”

Discord said it is using the additional time this year to add more verification options, including credit cards, more transparency on vendors and technical detail of how age verification will work, and once the system goes into effect, it will publish details on the percentage of users asked to verify age in its existing transparency reports.

Snap, which operates Snapchat, said it supports alternative approaches that reduce the need for platforms to collect identity information directly. “We believe there are better, more privacy-conscious solutions such as mandating age verification at the primary point of entry — the device, operating system, or app store level,” a Snap spokesperson told CNBC. 

Meta and Google did not respond to requests for comment. 

According to Tandy, as more states adopt age-verification mandates and companies race to comply, the infrastructure behind those systems is likely to become a permanent fixture of online life. Taken together, industry leaders say the rapid spread of age-verification laws may push platforms toward systems that verify age once and reuse that credential across services. 

“The way the trend is moving is definitely toward some kind of persistent verification of a user’s age,” Kaufmann said. In other words, a digital proof of age that travels with the user across platforms. 

Tandy said over time, once a system confirms someone’s age, it may not need to ask again. She compared the model to ecosystems such as Disney accounts, where a user’s age is established once and then recognized across its services rather than being rechecked every time they log in, even years later. 

For adults, that means an internet where identity verification is no longer occasional friction but a built-in layer of everyday access. 

The flagship American Girl Place at Rockefeller Center in New York City feels frozen in time.

The air smells faintly of vanilla. Young girls dart between doll displays clutching miniature shirts and sequined shoes. Beneath glittering chandeliers, the brand’s iconic red boxes line shelves with museum-like precision. Blow dryers hum in the Doll Salon, and downstairs, pink-frosted cupcakes land on cafe tables before dolls sitting upright in their miniature highchairs.

“It feels timeless,” said Jamie Cygielman, global head of dolls for Mattel, the brand’s parent company.

And yet, behind the scenes, the business of American Girl dolls is not what it once was.

As American Girl turns 40, the brand is navigating more modern challenges: digital competition, shifting play patterns and an aging, more cost-conscious customer base.

“The anniversary is at precarious moment for American Girl and the whole doll industry,” said Jaime Katz, an analyst who covers Mattel for Morningstar. “Kids are more digital in play, and the [American Girl] brand has struggled.”

Around a decade ago, at its peak, American Girl was recording more than $600 million in annual sales. By 2023, annual sales had fallen to roughly $200 million — just a third of prior levels.

While American Girl has shrunk back considerably from the mid-2010s, the brand has more recently posted five consecutive quarters of sales growth — one of the few steady performers inside Mattel’s portfolio.

“Growing off a base that’s down more than 60% doesn’t mean the brand is back. It means it’s stabilizing,” Katz told CNBC.

Earlier this month, Mattel reported fourth-quarter sales of $1.77 billion, falling short of Wall Street expectations after holiday demand came in lighter than projected and heavier discounting weighed on margins. Earnings per share likewise fell short, and Mattel issued a lower-than-expect profit forecast for 2026.

Mattel shares have fallen roughly 19% since the Feb. 10 report and are down about 20% over the past year. Citi and JPMorgan downgraded the stock after the results, too.

“People are watching Mattel this year … waiting with baited breath, because they are spending a ton and it seems unlikely they will be bringing in big profits,” Katz said.

Even before the Covid pandemic forced American Girl to reduce its retail footprint from about 15 stores in 2019 to seven U.S. locations today, the brand faced mounting competition from lower-priced alternatives at big-box retailers like Target’s “Our Generation” line.

A traditional, 18-inch American Girl typically starts at $135, excluding accessories, which can cost as much as $250 for a bunk bed or $275 for a beach cruiser.

The premium price once signaled to many parents a mark of quality and prestige, said Laura Tretter, co-host of the American Girl Women podcast. But in an inflation-conscious environment, it’s narrowed the customer base, Katz said.

“Parents are more selective about discretionary spending right now,” Katz said. “That price point [for an American Girl doll] looks steep to many households.”

Across the toy industry, companies, including competitors like Hasbro, are grappling with how to get kids interested in their products, particularly amid uneven consumer spending and, recently, trade uncertainty.

“There are so many more things today that a kid might be enticed by to play with,” Cygielman told CNBC. “There’s also more competition today, and we saw in the past that tariffs can make an impact on the toy market, but we adapt.”

For many kids, play has migrated toward tablets, gaming subscriptions and short-form video.

“The definition of ‘toy’ has changed,” Katz said. “A iPad or Nintendo Switch competes directly with a doll. There are simply more claims on the same discretionary dollar.”

Overall, Mattel’s doll and preschool categories have faced steady declines for the last three quarters, even after the halo effect of 2023’s “Barbie” movie. Global dolls sales fell 7% in the latest quarter, while the infant, toddler and preschool segment declined 17%.

Struggling sales for American Girl and Mattel’s Fisher Price brand motivated activist investor Barington Capital in 2024 to push the company to streamline its portfolio and improve returns, floating the possibility of selling off the brands.

“American Girl is not a huge part of Mattel’s overall financial profile,” Katz said. “Still though, for investors, the question isn’t whether the brand is beloved. It’s whether it’s strategically essential. It was a drag on profits.”

On a recent visit, Lisa Kandoski stood gazing at Molly McIntire — the World War II-era heroine adorned with round wire-rimmed glasses, a navy argyle sweater and braids tied in red ribbons — just like the doll Kandoski said her grandmother put under the Christmas tree in 1990.

“It’s not just a doll,” Kandoski, now 40, told CNBC, her eyes misty. “I sort of realized the impact Molly had on me as a kid. She taught me that you could be brave even when the world was scary, that you could ‘do your part’ even when you were small. She shaped who I am.”

That emotional alchemy has defined American Girl since it disrupted the doll industry in 1986. At the time, the market was dominated by either fashion dolls mirroring adulthood or baby dolls to rehearse motherhood.

The original six American Girl characters — Samantha, Kirsten, Molly, Felicity, Addy and Josefina — came with books tackling subjects rarely taught to young kids like child labor or racism, and all dolls treated girlhood itself as a formative stage.

“American Girl remains a moral compass for many of us,” said Tretter of the American Girl Women podcast. “I love that girls today are still getting positive messages about inclusivity, friendship and going through difficult changes.”

Over time, American Girl expanded into publishing, film and destination retail while diversifying its characters, like with the 2026 “Girl of the Year,” Raquel Reyes, a biracial DJ and animal rescuer who helps run her family’s Kansas City paleta shop.

The brand’s whimsical seriousness became a differentiator and fostered generational loyalty, said Justine Orlovsky-Schnitzler, a folklorist and author of “An American Girl Anthology: Finding Ourselves in the Pleasant Company Universe.”

Look no further than the Doll Hospital where white-coated “doctors” triage patients, fit wheelchairs, perform eye exams, and apply miniature casts for doll owners of all ages.

“That’s why people return,” Orlovsky-Schnitzler said. “You’re not just buying plastic and fabric. You’re revisiting a version of yourself.”

And even though the dolls remain preserved in childhood innocence, their original owners, now grown up, keep returning to American Girl through podcasts, memes, cosplay and fan fiction.

Some pass their dolls down to their children. Others buy new ones for themselves.

“There’s something powerful about handing your daughter the doll you once slept beside,” Orlovsky-Schnitzler said. “It’s also just as comforting to go back to the days of your youth with your own doll.”

So‑called “kidult” consumers — adults who buy toys for themselves — have become a coveted demographic. By late 2024, spending on toys for adults 18 and older had surpassed that for children ages 3 to 5, according to market research firm Circana. That cohort continued to drive industry growth in 2025.

Mattel has increasingly sought to monetize its intellectual property through publishing, collectibles, entertainment and digital platforms. In interviews and on calls with investors, Mattel CEO Ynon Kreiz has said that mobile games and interactive platforms are particularly promising areas.

However, “nostalgia must translate into durable revenue and sales growth,” Katz said. Lean too heavily into adult collectors, and a brand risks “aging alongside its original audience.” Pivot too aggressively toward digital trends, and it “risks diluting what made it distinctive.”

Competitors have been doing the same. For instance, Lego continues to release more brick building sets aimed at adults like flowers, art and collectables based on millennial pop culture favorites such as the 1990s TV hit “Friends.”

For American Girl, its 40th anniversary offers a natural inflection point to strike a balance between kid and adult fans, Cygielman said.

American Girl is releasing modernized versions of its original six characters and publishing its first book for adults, centered on Samantha Parkington and set during her adulthood in the 1920s.

At the same time, the brand is working to keep the next generation engaged through contemporary “Girl of the Year” storylines and investments in digital platforms, including YouTube, TikTok and “American Girl World” on Roblox.

“Nostalgia is an entry point, not the endgame,” Cygielman said. “The question is how we extend that emotional equity into new platforms and new audiences.”

Meta‘s deprioritizing virtual reality in favor of artificial intelligence and Internet-connected smart glasses has chilled the industry, leading to concerns about its future.

“I can see how it feels like a VR winter,” said Jessica Young, an independent VR content creator specializing in Horizon Worlds, Meta’s virtual social network.

The social media giant last week laid off 10% of employees who work within its Reality Labs unit, with the cuts centering on VR-related initiatives like the Quest VR headsets, CNBC reported. Teams working on Horizon Worlds were hit hard and some in-house studios were shuttered. Approximately 1,000 jobs were cut, CNBC reported.

The move was part of the company’s effort to redirect Reality Labs investments from VR to AI and wearable devices like the Ray-Ban Meta smart glasses that are co-produced with EssilorLuxottica, a spokesperson for the social media company said in a statement last week. Meta declined to comment further beyond its previous statement.

Meta’s reduced investment in VR is notable considering how much the company has helped grow the industry since its $2 billion acquisition of Oculus in 2014. The company became synonymous with VR when CEO Mark Zuckerberg changed its name from Facebook to Meta, representing the founder’s obsession with a future of digital worlds referred to as the metaverse. Since late 2020, Meta’s Reality Labs division has logged over $70 billion in cumulative losses.

Zuckerberg’s sudden reversal has some VR developers worried about their future prospects. While they said they don’t see Meta killing its VR efforts, a major shift appears to be underway.

Meta traditionally announces new Quest VR headsets during its annual Connect conference in the fall, but in 2025, the company skimped on VR hardware. Instead, Meta introduced its $799 Meta Ray-Ban Display glasses that contain a single, built-in digital screen.

“If Meta’s not putting out a new headset for another year or two, it’s going to feel stale,” Young said. “It already kind of does.”

Since the layoffs, Meta tech chief Andrew Bosworth has been vocal that the social media giant is not abandoning VR.

“We’re still continuing to invest heavily in this space, but obviously, VR is growing less quickly than we hoped,” Bosworth told tech newsletter Sources. “And so you want to make sure that your investment is right-sized.”

Bosworth this week also circulated a post by Oculus co-founder Palmer Luckey, who on Sunday wrote on X that Meta still employs the “largest team working on VR by about an order of magnitude.”

Although Luckey said that he feels “really bad for the people impacted” by the layoffs, the Reality Labs changes represent “a good thing thing for the long-term health of the industry, especially the ongoing incentives.”

Market research firm IDC said in a December report that a major transition is occurring in the so-called Extended Reality, or XR, device segment. This category includes VR and so-called mixed-reality headsets that allow users to switch between virtual environments and see their surroundings outside the helmet. The category also counts AI-powered smart glasses and more powerful versions with digital displays.

IDC projects the XR device category to have grown 41.6% year-over-year to 14.5 million units shipped for 2025. But that growth has nothing to do with VR and mixed-reality headsets — those shipments are expected to drop 42.8% to 3.9 million in 2025. The rest of this XR category, which includes AI glasses with and without displays, is projected to grow 211.2% year-over-year to 10.6 million units shipped for 2025.

Jitesh Ubrani, a research manager for market analyst firm IDC, characterized the VR headset market as niche and appealing to only a small segment of video gamers. Average consumers seem uninterested in wearing “big, bulky headsets” for lengthy VR sessions like much of the tech industry hoped for roughly a decade ago, he said.

“The market has spoken,” Ubrani said. “There are certain niche audiences that will continue to use these headsets, but it’s not going to be broadly appealing.”

Andrew Eiche, the CEO of the Google-owned VR gaming studio Owlchemy Labs, said it was always misguided to think VR was on the cusp of having its breakthrough smartphone moment. He called it a “strategic mistake” to compare VR headsets to iPhones

The VR market, Eiche said, more closely resembles old-school Atari video game consoles that were popular before sales crashed during an infamous 1983 gaming market meltdown. It wasn’t until the late 1980s that Nintendo consoles helped revive the market, laying the groundwork for the overall industry to balloon to the massive sector it is today.

“Lot of tech people thought [VR] was going to be instantly amazing, and the same thing’s happening with AI,” Eiche said about the tech industry’s pivot to the latest craze. “When you’re looking at long-term technologies, VR is not going anywhere.”

Still, Eiche said that beyond Meta’s layoffs, other VR studios have also recently downsized as part of a broader video game industry slump. Because Quest is the dominant VR headset on the market, its app store is a key distribution channel for third-party VR.

Making matters worse, Eiche said that Meta’s Horizon Worlds push came at the expense of third-party developers who were trying to find visibility among Quest users.

“We’re at the mercy of Meta,” Eiche said, adding that it “creates a situation where if Meta pulls back, we all pull back.”

Eiche said he’s optimistic that the upcoming Steam Frame wireless VR headset from gaming company Valve will help the market, as well as the recent entries of other devices like the Samsung Galaxy XR, which debuted in October, and Apple’s Vision Pro.

But Apple’s entry into the VR space in February 2024 hasn’t done much to move the needle, and in January, IDC said that Apple’s Chinese manufacturing partner Luxshare stopped producing new Vision Pro headsets, signaling a lack of widespread consumer demand. Still, Ubrani said that Apple’s $3,499 spatial computing headset has found some footing as a business tool.

“Apple did do well in selling to a lot of developers, but they also sold into some very big companies,” Ubrani said.

As part of Meta’s Reality Labs cuts, the company said in a support page that it would end its Horizon managed services program that was for businesses that used Quest headsets for internal tasks like virtual employee trainings.

Meta failed to realize “how big VR could be if they adopted the bigger picture outside of gaming,” said Sean Mann, CEO of the startup RP1, which develops a “metaverse browser” for people to access virtual and augmented reality environments.

As Meta downsizes its VR ambitions and steers Horizon Worlds to be a mobile-focused online gaming platform like Roblox, Young said she plans to keep creating experiences on the platform.

Young has been able to make a living by getting paid by other Horizon developers to create trailers to promote experiences available to users on the service. She’s also earned money from Meta by winning Horizon-related competitions intended to help improve the overall platform.

But Young said she’s less enthusiastic about Horizon’s mobile push, because there was something special about the platform during its earlier, VR-centric years, particularly during the Covid era.

“Horizon became a lifeline for people isolated by the pandemic, disability, age or geography,” she said. “Many users who never imagined themselves as creators, who had no background in art or programming, were inspired by their friends to try.”

But Horizon lost is way, and “what’s frustrating now is watching people declare it dead without ever having experienced or understanding what it was,” Young said.

WATCH: Meta’s Joel Kaplan on AI investments: Our ambition is to build ‘personal superintelligence.’

OpenAI on Tuesday said it is rolling out an age prediction model to its ChatGPT consumer plans to help the artificial intelligence company identify accounts that belong to users under 18 years old.

The model relies on a combination of account-level signals and behavioral signals, OpenAI said. Some of those signals include usage patterns over time, how long an account has existed, the typical times of day a user is active and the user’s stated age.

OpenAI has rolled out several new safety features in recent months as it faces mounting scrutiny over how it protects users, particularly minors.

The AI startup and other tech companies are facing a probe from the FTC over how their AI chatbots potentially negatively affect children and teenagers, and OpenAI is named in several wrongful death lawsuits, including one that centers around a teenage boy’s death by suicide.

Once OpenAI’s age prediction model suggests that a user is under 18, OpenAI said, ChatGPT will automatically apply protections designed to reduce exposure to “sensitive content,” like depictions of self-harm.

If users are incorrectly identified as being under 18, they will be able to use the identity-verification service Persona to restore their full access.

Persona is used by other tech companies, including Roblox, which has also faced pressure from lawmakers to better protect children on its platform.

In August, OpenAI said it would release parental controls to help them understand and shape how their teens are using ChatGPT. The following month, OpenAI rolled out its parental controls and said it was working to build an age prediction system.

The company also convened a council of eight experts in October who will provide insight into how AI could affect users’ mental health, emotions and motivation. 

OpenAI said Tuesday that it will continue to improve the accuracy of its age prediction model over time.

The model will roll out in the European Union in the coming weeks “to account for regional requirements.”

If you are having suicidal thoughts or are in distress, contact the Suicide & Crisis Lifeline at 988 for support and assistance from a trained counselor

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A little over four years after Mark Zuckerberg changed Facebook’s name to Meta, reflecting his view that the future of work, play and socializing was going virtual, the company is making a major course correction. 

Meta this week began laying off employees focused on virtual reality within its Reality Labs division and is shutting down a number of studios that were working on VR titles, according to people familiar with the matter who asked not to be named due to confidentiality. CNBC confirmed a report from the New York Times that layoffs, amounting to more than 1,000 jobs, will impact about 10% of the hardware division, which makes Quest VR headsets, and the Horizon Worlds virtual social network. 

Andrew Bosworth, Meta’s chief technology officer, is slated to hold an all-hands meeting with Reality Labs on Wednesday, some of the people said.

Meta is scaling back its metaverse ambitions as the company continues ramping up its investments in artificial intelligence, Zuckerberg’s more recent obsession and the technology that’s consumed Silicon Valley and the broader industry. Zuckerberg has been paying big bucks for top AI talent, most notably shelling out $14.3 billion in June to hire Scale AI founder Alexandr Wang, who’s now leading AI strategy, along with other engineers and researchers from the startup.

In October, Vishal Shah, who spent four years leading the company’s metaverse efforts, was named vice president of AI products. That month Meta lifted the range of its 2025 capital expenditures to between $70 billion and $72 billion and said dollar growth would be “notably larger” in 2026.

The studios that are closing as part of the latest changes include Armature Studio, Twisted Pixel, and Sanzaru, as well as a technical unit called Oculus Studios Central Technology, sources told CNBC. Jobs are also being cut at other studios including Ouro Interactive, which Meta debuted in 2023 to build first-party content for Horizon Worlds.

Supernatural, a VR fitness app that Meta purchased for $400 million in 2023, was moved into maintenance mode, meaning it will be run by a skeleton crew and no longer receive new content, said people with knowledge of the matter.

Meta laid the groundwork for this week’s announcement in December, when the company said it would be shifting resources within Reality Labs’ budget away from its VR initiatives toward its endeavors with AI glasses and wearable devices.

“This is part of that effort, and we plan to reinvest the savings to support the growth of wearables this year,” a Meta spokesperson said, without commenting specifically on the layoffs.

While Meta’s VR projects have never taken off, the company has had better success in AI-powered wearables, particularly through a partnership with EssilorLuxottica to make Ray-Ban Meta smart glasses.

In September, the two companies unveiled the Meta Ray-Ban Display glasses, which cost $799 and contain a single, built-in display that shows users small messages and previews of photos. Meta said last week that it would delay the global debut of the display glasses, citing “limited” inventories amid “unprecedented” U.S. demand.

Luxottica CFO Stefano Grassi said in October that his company will be able to reach the 10 million unit capacity for the glasses that it had originally planned to hit by the end of 2026 earlier than anticipated.

Meta’s decision to scale back its VR efforts comes 12 years after Facebook entered the market with the $2 billion purchase of Oculus VR. Since late 2020, Meta’s Reality Labs division has logged over $70 billion in cumulative losses. In its latest quarterly earnings in October, Meta said Reality Labs recorded a $4.4 billion loss on $470 million in sales.

Meanwhile, the company is wrestling with a scattershot AI strategy as it tries to keep pace with OpenAI and Google, whose large language models and AI features are soaring in popularity. Meta plans to release its next frontier model, codenamed Avocado, in the first quarter of this year, CNBC reported last month.

Meta’s stock price badly trailed Alphabet’s last year and came up short of the Nasdaq, a trend that’s continued in the early days of 2026, with the shares down more than 4% since the calendar changed.

Horizon Worlds has been a struggle from the start.

In August 2022, 10 months after Zuckerberg announced plans to go all-in on the metaverse, he posted a photo to his Facebook profile showing his avatar in front of animated versions of the Eiffel Tower and Spain’s Basílica de la Sagrada Família. The picture was lambasted on social media for its low-quality graphics. Zuckerberg posted a new image days later of an improved version of his avatar, promising users that “major updates to Horizon and avatar graphics” were coming soon.

But inside Horizon Worlds, the photo fiasco was a defining moment, according to people familiar with the matter. Zuckerberg called a meeting with the team responsible for VR avatars demanding improvements, one of the people said.

Multiple VR developers told CNBC that Horizon Worlds usage remains low based on their observations, adding that the company doesn’t share specific stats. The developers said they’re frustrated because they don’t have accurate information that could help them create more compelling games and experiences.

Rather, in Meta’s refocusing toward a more Roblox-like experience, the company last year began instructing existing third-party Horizon Worlds developers to build kid-friendly, simplistic games.

Deepak Nair, a developer advocate at Meta, discussed the strategy in August with an audience of developers in Berlin, encouraging them to mimic Roblox and Minecraft in building games that let kids create stories they can share with their friends. Nair said a key issue for developers is identifying the right demographic.

“Generally 13 to 24, right?” Nair said. “And even on other ecosystems, it’s even younger than that.”

In February, Meta launched a $50 million Creator Fund intended to entice developers to create more in-game experiences inside Horizon Worlds, with a focus on mobile. The company is planning to make it easy for Facebook and Instagram users to seamlessly access Horizon Worlds, sources said.

— CNBC’s Kif Leswing contributed to this report.

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