Source: JIN10
Do more Meta layoffs mean the company still has fat to trim, or do they signal 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 late 2022, aiming to offset the high costs of AI infrastructure and enhance AI-assisted efficiency.
A top Wall Street analyst said in a report on Monday that any further moves by Meta to cut headcount could actually signal that the company is successfully reinventing itself as an "AI-first" enterprise. And that might not be good news for its competitors.
Despite deep investments in AI, Meta Platforms (META.O) has not yet launched a leading model like Google and OpenAI have, Bernstein analyst Mark Shmulik said. Meta's aggressive push to transform itself into a top-down AI company could put it ahead of rivals 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 draw up cost-cutting plans.
Bernstein's Shmulik said this could indicate Meta is taking a lead 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, "uncontestably widening" their competitive moats.
Shmulik wrote: "Meta has already shown significant returns from deploying AI into core workloads. But if the company can now fundamentally redesign its operating system to be truly AI-native, the potential cost and performance advantages could be insurmountable."
By one measure, Zuckerberg's efficiency overhaul over the past three years has worked. According to data shared by Bernstein this week, Meta's revenue per employee has continued to grow over the period and surpassed Amazon's last year. Only Pinterest's metric is higher.
Meanwhile, the Bernstein report shows Meta's per-employee capital expenditure and R&D spending are significantly higher than its peers, which may 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 Monday.
The company is also aggressively pushing AI adoption internally. Previously, foreign media reported that Meta said it would start rating employees on their "AI-driven impact" in performance reviews this year and tracking how some teams use the tools.
Companies like Atlassian and Block have recently cited AI as a reason for layoffs, raising the question of whether some business leaders are engaging in "AI greenwashing"—using AI to cover up 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 certainly possible at Meta and elsewhere, the layoffs could also indicate the company is starting to see efficiency gains.
From late 2022 to early 2023, Zuckerberg declared a "Year of Efficiency," with the company cutting over 20,000 jobs, reducing non-technical roles, flattening management layers, and reviving 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 what a true "AI-first company" looks like.
He wrote: "If one major player can redraw the blueprint for an AI-enabled organization, others will quickly attempt to replicate... and we suspect this could trigger a cascade of rushed pivots, half-baked strategies, and reactive reorganizations across the ecosystem."
