Facebook-parent Meta Platforms (META.O) said on Tuesday it would cut 10,000 jobs this year, making it the first Big Tech company to announce a second round of mass layoffs as the industry braces for a deep economic downturn.
Meta shares jumped 6% on the news. The widely-anticipated job cuts are part of a restructuring that will see the company scrap hiring plans for 5,000 openings, kill off lower-priority projects and “flatten” layers of middle management.
They followed the company’s first mass layoff in the fall, which eliminated more than 11,000 jobs, or 13% of its workforce at the time, after a hiring spree that doubled the employee count it had as of 2020.
Worries of an economic downturn due to rising interest rates have sparked a series of mass job cuts across corporate America in recent months. Tech companies have led the way, shedding more than 290,000 workers since the start of 2022, according to tracking site Layoffs.fyi.
Meta’s purge of employees has been one of the sector’s most pronounced. On top of inflation woes, the company is also facing down unique threats to its core digital ads business while spending handsomely on Chief Executive Mark Zuckerberg’s plans to build a futuristic metaverse.
In a message to staff on Tuesday, Zuckerberg said most of the new cuts would be announced in the next two months, though in some cases they would continue through the end of the year.
“For most of our history, we saw rapid revenue growth year after year and had the resources to invest in many new products. But last year was a humbling wake-up call,” Zuckerberg wrote.
“I think we should prepare ourselves for the possibility that this new economic reality will continue for many years.”
Zuckerberg said he planned to further reduce the size of the recruiting team, which was already hard-hit in the fall layoffs. Restructurings in the tech group would be announced in late April and cuts to business groups would come in May.
Meta also will remove multiple layers of management and ask many managers to become individual contributors, while eliminating non-engineering roles, automating more functions and at least partially reversing a commitment to “remote-first” work that Zuckerberg made amid COVID-19 pandemic lockdowns.
SATISFYING INVESTORS
The first of the latest wave of cuts appeared to have started even before Zuckerberg’s announcement. On Friday, Meta said it was exploring “strategic alternatives” for Kustomer, a customer service company it acquired last year.
It also disbanded its skunkworks New Product Experimentation team and reassigned leader Ime Archibong to work on product for Messenger, according to an internal memo seen by Reuters. Both changes were initially reported by the Wall Street Journal.
Investors have grown wary of Zuckerberg’s prolific spending as revenue growth from Meta’s main businesses petered out amid high inflation and a digital ads pullback from the pandemic e-commerce boom.
The company also has struggled with Apple-led (AAPL.O) privacy changes and competition for young users from short video app TikTok.
At the same time, Meta has been pouring billions of dollars into its metaverse-oriented Reality Labs unit, which lost $13.7 billion in 2022, and investing in infrastructure to support its artificial intelligence usage.
Wall Street has been rewarding Meta steadily since its November restructuring, after its share price fell more than 70% earlier in 2022. The stock received another boost in February when Zuckerberg dubbed 2023 the “Year of Efficiency,” with new cost controls and a $40-billion share buyback.
The latest downsizing indicates “how desperate the company is to get costs under control as its revenues have fallen amid declining marketing budgets,” said Hargreaves Lansdown analyst Susannah Streeter.
“Virtual reality is an expensive business to be in, so while (Meta) maps out a path through an uncertain landscape, it needs to find efficiencies elsewhere,” she added.
In his memo, Zuckerberg made scant mention of virtual reality and instead emphasized the company’s focus on AI, saying Meta’s single largest investment was in “advancing AI and building it into every one of our products.”
Meta has teased AI-powered “creative aids” that can generate images, videos and text but has yet to offer any such products on its apps, even as peers have launched dueling generative AI chatbots and productivity tools in recent months.
With the latest cuts, Meta expects expenses in 2023 to come in between $86 billion and $92 billion, lower than the $89 billion to $95 billion forecast previously.
