Facebook parent Meta Platforms said Tuesday it will cut 10,000 jobs this year, making it the first Big Tech company to announce a second round of massive layoffs as the industry prepares for a deep economic downturn.
Meta shares rose 6 percent on the news. The widely expected job cuts are part of a restructuring that will see the company scrap plans to hire 5,000 jobs, eliminate lower-priority programs and “flatten” middle management ranks.
They followed the company’s first mass layoffs in the fall, which eliminated more than 11,000 jobs, or 13 percent of the workforce at the time, after a hiring spree that doubled the number of employees by 2020.
Concerns about an economic downturn due to rising interest rates have sparked massive job cuts in corporate America in recent months. Tech companies are leading the way, laying off more than 290,000 workers since the start of 2022, according to the tracking site Layoffs.fyi.
Meta’s purge of employees has been one of the industry’s most prominent. In addition to inflation issues, the company also faces unique threats to its core digital advertising business while spending heavily on CEO Mark Zuckerberg’s plans to create a futuristic metaversion.
In a message to employees on Tuesday, Zuckerberg said most of the new layoffs would be announced in the next two months, though some would continue until the end of the year.
“For most of our history, we’ve seen rapid year-over-year revenue growth and had the resources to invest in many new products. But last year was a humbling wake-up call,” Zuckerberg wrote.
“I think we have to prepare for the possibility that this new economic reality will continue for many years.”
Zuckerberg said he plans to further reduce the size of the recruiting team, which was already hit hard by fall layoffs. Reorganizations in the technology group will be announced at the end of April, and layoffs in the business groups will take place in May.
Meta will also 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 the “remote first” work commitment that Zuckerberg made amid the Covid-19 pandemic lockdowns. : .
The first of the latest wave of layoffs appears to have begun even before Zuckerberg’s announcement. Meta said on Friday it was exploring “strategic alternatives” for Kustomer, the customer services firm it acquired last year.
It also disbanded its skunkworks New Product Experimentation team and reassigned chief Im Archibong to work on the Messenger product, Reuters said in an internal report. Both changes were originally reported by the Wall Street Journal.
Investors have been wary of Zuckerberg’s lavish spending, as revenue growth from Meta’s core businesses has slowed amid high inflation and a slowdown in digital advertising from the e-commerce pandemic boom.
The company has also struggled with Apple-led privacy changes and competition from TikTok, a short-form video app for younger users.
Meanwhile, Meta is pouring billions of dollars into its Metaverse-based Reality Labs unit, which is set to lose $13.7 billion in 2022, and investing in infrastructure to support the use of artificial intelligence.
Wall Street has been steadily rewarding Meta since a November restructuring that saw its share price fall more than 70 percent earlier in 2022. The stock got another boost in February when Zuckerberg called 2023 the “Year of Performance” with new cost controls and a $40 billion share buyback;
The latest cut shows “how desperate the company is to get costs under control as its revenues have fallen amid shrinking marketing budgets,” said Hargreaves Lansdown analyst Suzanne Streeter.
“Virtual reality is an expensive business, so while (Meta) is charting a path through an uncertain landscape, it will have to find efficiency elsewhere,” he added.
In his memo, Zuckerberg made little mention of virtual reality and instead emphasized the company’s focus on AI, saying that Meta’s biggest contribution was “advancing AI and embedding it into every product we have.”
Meta has teased AI-powered “creative aids” that can generate images, videos and text, but has yet to offer such a product in its apps, even as partners in recent months have launched AI-generating chatbots and productivity tools.
With the latest cuts, Meta expects spending to be between $86 billion and $92 billion in 2023, down from a previous forecast of $89 billion to $95 billion.
- Reporting by Kathy Paul in New York and Nivedita Balu and Aditya Soni in Bengaluru; Editing by Anil D’Silva and Nick Zieminski of Reuters.