Meta Platforms (Nasdaq: META) CEO Mark Zuckerberg announced Wednesday morning that the company would be laying off 13% of its workforce, or 11,000 employees, and that it would be extending the hiring freeze announced in September through March next year.
“Today I’m sharing some of the most difficult changes we’ve made in Meta’s history,” Zuckerberg said in his message to Meta employees. “I’ve decided to reduce the size of our team by about 13% and let more than 11,000 of our talented employees go. We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.”
Zuckerberg took responsibility for the cuts, citing that the company had scaled up too rapidly, assuming the outsized revenue growth during the pandemic “would be a permanent acceleration.”
In October, the company posted a 50% decline in quarterly profits. And its stock has plummeted by about 70% year to date.
“Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected. I got this wrong, and I take responsibility for that,” he admitted.
Zuckerberg has put as much as $10 billion into building the metaverse, which has not picked up in popularity, not even within his own company. Revenue in Reality Labs, the business unit developing the metaverse, has dropped 50% year-over-year according to Meta’s Q3 financials. The company expects Reality Labs’ operating losses to go up next year.
Understandably, many have bemoaned the CEO’s focus on the metaverse. In late October, Altimeter Capital CEO Brad Gerstner, one of the tech giant’s investors, published a letter to Zuckerberg advising a $5-billion limit on metaverse spending.
As of this writing, it is still unclear what the impact of the layoffs on Reality Labs will be, what’s clear is that the unit will also be affected by the cuts in one way or another.
“Fundamentally, we’re making all these changes for two reasons: our revenue outlook is lower than we expected at the beginning of this year, and we want to make sure we’re operating efficiently across both Family of Apps and Reality Labs,” Zuckerberg said.
US-based employees affected by the layoffs will receive a severance consisting of 16 weeks of base pay plus two weeks for every year of service. The company will also pay for remaining PTO time, give the affected employees their RSU vesting for November 15, and receive healthcare for the affected employees and their families for six months.
Meta last traded at $103.62 on the Nasdaq.
Information for this briefing was found via Meta, the New York Times, Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.