Meta Platforms stock jumped 3% Monday after a Reuters report revealed plans to cut 20% or more of its workforce. The move aims to offset heavy spending on artificial intelligence and drive productivity gains.
The potential layoffs would mark the company’s largest since its 2022-2023 'year of efficiency,' which eliminated 21,000 jobs. With a current workforce of 79,000, a 20% reduction could save $6 billion annually.
Meta has aggressively invested in AI infrastructure, planning up to $135 billion in capital spending by 2026-double last year’s outlay. It also finalized a $27 billion deal with Nebius for cloud services to support AI model training.
Despite advances in ad-tech, Meta has yet to release an AI model competitive with OpenAI, Anthropic, or Google. Its internal model, Avocado, has underperformed expectations.
Rosenblatt Securities analyst Barton Crockett noted the cuts could exceed 20% if AI significantly boosts efficiency. Meta called the report "speculative," but investors reacted positively.
Global AI-driven layoffs have surpassed 61,000 since November, including cuts at Amazon and Wisetech. Block CEO Jack Dorsey recently cited AI as a reason for slashing nearly half his workforce.
Some analysts argue AI is being used as a convenient narrative for overdue restructuring. Bernstein’s Mark Shmulik said companies may use AI as camouflage, but believes Meta is well-positioned to transition into an AI-first organization.