Meta Shares Rise as Company Considers Substantial Workforce Reduction

Meta Platforms Inc. (META) Market Update

On Monday, Meta Platforms shares rose 3% after a Reuters report revealed the company's plans to lay off 20% or more of its workforce to offset heavy spending on artificial intelligence (AI) and bet on productivity gains from the technology.

Key Figures

• If Meta settles on the 20% figure, the cuts will be the biggest since a late 2022 and early 2023 restructuring, which eliminated around 21,000 jobs.
• The layoffs would amount to approximately $6 billion in cost savings, or a 5% boost to adjusted core earnings.
• Meta's workforce totaled 79,000 at the end of December.
• The company expects a capital outlay of up to $135 billion in 2026, roughly double of last year's spending.
• Meta will spend up to $27 billion for cloud services from Nebius under a deal on Monday.

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Financial Impact

The heavy spending on AI has powered improvements in Meta's ad-tools and boosted sales, but it has yet to roll out an AI model that can challenge industry leaders OpenAI, Anthropic, and Google. A 20% staff cut could lead to significant cost savings, and Rosenblatt Securities analyst Barton Crockett believes it could be a 5% boost to adjusted core earnings.

Industry Trends

AI-linked layoffs have been rising globally, with companies announcing more than 61,000 job cuts tied to AI since November. The debate over AI replacing human workers has intensified, with some analysts noting that the layoffs also follow a period of over-hiring at companies.

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