Meta CEO Mark Zuckerberg dismissed 13% of his company’s workforce on Wednesday as revenues lag and costs increase.
The social media firm’s performance has worsened significantly over the past year as executives began pouring resources into developing the metaverse, an immersive virtual reality that Zuckerberg believes will serve as the next phase of digital communication. Beyond excessive funds devoted toward the project, analysts had criticized Zuckerberg for more than tripling payrolls from 25,000 people to 85,000 people over the past four years.
In a letter to employees, Zuckerberg announced that he would lay off more than 11,000 staff members and extend the company’s hiring freeze. “In this new environment, we need to become more capital efficient,” he remarked. “We’ve cut costs across our business, including scaling back budgets, reducing perks, and shrinking our real estate footprint. We’re restructuring teams to increase our efficiency. But these measures alone won’t bring our expenses in line with our revenue growth, so I’ve also made the hard decision to let people go.”
Employees will receive 16 weeks of base pay, as well as two additional weeks for each year of service without limit and healthcare coverage for the next six months.
Meta shares rose nearly 7% to reach $102.98 on Wednesday morning. The company’s stock price has fallen 69.6% since the beginning of the year, significantly trailing the Dow Jones Industrial Average and the technology-heavy NASDAQ, which have dropped 10.1% and 33.8% over the same period, respectively.
“I view layoffs as a last resort, so we decided to rein in other sources of cost before letting teammates go. Overall, this will add up to a meaningful cultural shift in how we operate,” Zuckerberg added. “For example, as we shrink our real estate footprint, we’re transitioning to desk sharing for people who already spend most of their time outside the office. We’ll roll out more cost-cutting changes like this in the coming months.”
Meta’s most recent earnings report shows that revenues fell year-over-year from $29.0 billion to $27.7 billion, indicating a 4% decline, even as costs and expenses increased 19%, from $18.6 billion to $22.1 billion. Net income more than halved while earnings per share plummeted from $3.22 to $1.64.
Although macroeconomic headwinds have impacted most industries, the technology sector has witnessed the most pronounced stock market selloffs. Zuckerberg’s announcement comes one week after Stripe and Lyft dismissed similar portions of their headcounts, which occurred as Amazon instituted a freeze on incremental hires in its corporate workforce. Elon Musk, who recently took control of the social media platform Twitter, laid off half of the company’s employees.
Zuckerberg had faced pressure from investors, including Altimeter Capital Management CEO Brad Gerstner, to deal with bloated payrolls. Gerstner also suggested reducing spending on the metaverse, although Zuckerberg did not mention a broader pivot away from the initiative, which prompted his company to change its name from Facebook last year.
“It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people,” the investor said. “I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion.”
