Source: Jinshi Data
Do more Meta layoffs mean the company still has redundancies to cut, or do they indicate that its AI investments are actually starting to pay off?
According to foreign media reports, Meta plans to lay off 20% of its workforce (approximately 16,000 people), the largest round of layoffs since the end of 2022, aiming to offset the high costs of AI infrastructure and improve AI-assisted efficiency.
A top Wall Street analyst said in a report on Monday that any further moves by Meta to cut its headcount could actually signal that the company is successfully reinventing itself as an "AI-first" enterprise. And this might not be good news for its competitors.
Despite deep investments in AI by Meta Platforms (META.O), it has not yet launched a leading model like Google and OpenAI, said Bernstein analyst Mark Shmulik. Meta's aggressive push to transform itself into a top-down AI company could give it a lead over competitors and trigger a wave of "panic" as peers scramble to follow suit.
Meta is investing hundreds of billions of dollars in building AI data centers and attracting talent to strengthen its AI research team. Last week, Reuters was the first to report that the company is weighing layoffs, with some managers being asked to formulate cost-cutting plans.
Bernstein's Shmulik said this could indicate Meta is gaining an edge in a key front of the AI competition. While companies can win with world-class frontier models, they can also beat competitors by deeply deploying AI into their core businesses, making their competitive moats "indisputably wider."
Shmulik wrote: "Meta has already demonstrated significant returns from deploying AI into core workloads. But if the company can now fundamentally redesign its operating system to be truly AI-centric, its potential advantages in cost and performance may be difficult to surpass."
By one metric, Zuckerberg's efficiency reforms over the past three years have borne fruit. According to data shared by Bernstein this week, Meta's revenue per employee has continued to grow over the past period and surpassed Amazon's last year. Only Pinterest has a higher figure for this metric.
Meanwhile, Bernstein's report shows that Meta's capital expenditure and R&D investment per employee are significantly higher than its competitors, which might also explain the potential layoffs.
Investors seemed to react positively to Meta's consideration of further cost cuts, with the company's stock rising about 2% in early trading on Monday.
The company is also actively promoting the internal application of AI. Previously, foreign media reported that Meta stated it would begin scoring employees based on their "AI-driven impact" in performance reviews starting this year and track how some teams use these tools.
Companies like Atlassian and Block have recently cited AI as one reason for layoffs, raising the question of whether some business leaders are engaging in "AI greenwashing," using AI to mask other reasons for job cuts, such as financial issues or over-hiring during the COVID-19 pandemic.
Bernstein's Shmulik said that while "AI greenwashing" is indeed possible at Meta and other companies, layoffs could also indicate that the company has begun to see efficiency gains.
From late 2022 to early 2023, Zuckerberg declared a "Year of Efficiency," during which the company cut over 20,000 positions, reduced non-technical roles, flattened management layers, and helped revive its previously sluggish stock price.
Shmulik said if Meta goes through a similar cycle again in the AI era, it could set a template for a truly "AI-first company."
He wrote: "If one major company can redraw the blueprint for an AI-enabled organization, others will quickly try to replicate it... and we suspect this could trigger a cascade of hasty transformations, half-baked strategies, and reactive restructurings across the industry ecosystem."
