Meta Reportedly Slashing 20% of Workforce as Big Tech Leans Into AI
Are there more layoffs in the future for Meta? It is being reported that the social media giant may undergo a significant staff reduction as it begins to lean more on Artificial Intelligence (AI). Here is what you need to know about Meta and its rumored layoffs.
Reuters Reports Incoming Meta Layoffs
According to a recent report from Reuters, Meta may let go of 20% of its staff as it leverages the power of AI to perform more tasks. Meta has not confirmed the reporting about the incoming layoffs. A spokesperson for the company that operates Instagram and Facebook replied to the Reuters report by saying that it was "speculative reporting about theoretical approaches."
What is not a secret in the industry is that Meta has been investing a significant amount of money in AI. The company has been facing mounting pressure from investors to cut costs in an effort to mitigate its recent heavy spending.
Reuters reported that Meta has not finalized when the layoffs may happen, nor has it confirmed details about what departments may be impacted by the cuts. Meta employed almost 79,000 staff members as of its last annual filing.
The report released on Friday was enough to encourage investors about the future of the company. Shares of Meta were up 2.9% in Monday's premarket activity. Meta closed the trading day on Monday up 2.33%, finishing at 627.45. This is significant as shares had plummeted over 20% over the last six months. Wall Street had routinely criticized the company for its AI overspending.
Jefferies analyst Brent Thill said on Sunday that a 20% reduction in staffing at Meta could increase the company's annualized revenue per employee to $3.5 million. This would be a $1.3 million increase from the same figure a year ago.
Meta has already confirmed that it plans to invest up to $135 billion in AI technologies in 2026. As such, many experts on Wall Street view the rumor of layoffs as a way to offset this considerable spending.
Thill also noted that Meta's reported layoffs could change how other technologies approach the hiring process amidst the landscape of AI. Thill wrote, "If Meta is willing to reduce headcount at this scale while ramping AI investment, we think it signals a broader shift: AI is increasingly driving productivity."
Impact of AI on Staffing Levels for Big Tech Companies
Should the layoffs at Meta come to fruition, it will follow a trend that has been set over the past few months in the industry. Several other software and internet leaders have also announced widespread layoffs. For instance, fintech company Block announced that it was reducing its employee count from over 10,000 to about 6,000.
The Block layoffs launched a conversation in the industry about the impact of AI on staffing levels. While some leaders downplay the role of AI in these restructuring decisions, critics of the emerging technology believe that companies are using the investment in AI as an excuse to roll out layoffs. The latest numbers indicate that many of the world's leading Big Tech companies can afford to operate with up to 50% fewer employees and still sustain their growth trajectory.
This would not be the first time that Meta pulled the trigger on a sweeping staff reduction initiative. The company let go of 11,000 employees in late 2022, translating to a reduction of 13% of its workforce. The reports by Reuters of a 20% workforce reduction would be the largest since that time.
Bernstein analyst Mark Shmulik noted that a layoff of this degree could result in a 3% to 5% earning-per-share growth in 2026. This upside could jump to 4% to 7% in 2027 if the savings on staff are reinvested into AI technologies.
Shmulik believes that Meta is one of the best candidates to leverage this wide-scale AI deployment. According to Shmulik, Meta has the ability to lead the way in how companies restructure their staffing needs to best use the power of AI.
While the future is still unclear about how effective AI will be in replacing humans for some tasks, technology leaders will certainly be at the forefront of exploring these options. For now, it appears as if Meta is leading the charge.
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