Key takeaways
- Meta’s third and what’s hoped to be final round of job cuts has now been announced
- The Big Tech titan’s share price was up 1% at the news
- It’s a bright spot for the stock in an otherwise difficult period
The third and final round of layoffs has now been announced at Meta, with remaining employees hoping it’s an end to months of uncertainty. As Zuckerberg’s so-called ‘year of efficiency’ continues, Wall Street will now want to see that the layoffs have made a difference in the following earnings report.
It’s still an uncertain picture for the tech industry, which often has the most exciting gains and losses on the stock market, thanks to higher inflation and the unresolved debt-ceiling crisis. Let’s take a closer look at exactly what’s gone down at Meta and how investors reacted.
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What’s happened at Meta?
Meta confirmed earlier this year it would be making 10,000 job roles redundant as the company had doubled its headcount during the pandemic, hiring 41,000 people to keep up with the money pouring into the company. Meta also slashed 13% of its workforce in November 2022, the first time the wildly successful social media company had made layoffs.
This third round is set to affect 6,000 roles across Meta. The job cuts have been far-reaching across many business departments this round, including marketing and communications, privacy and integrity, security and program management. Back in March CEO Mark Zuckerberg said he planned to “substantially” restructure the business side of Meta and bring it to a “more optimal ratio of engineers to other roles”.
Nearly 500 roles are expected to be slashed at Meta’s Dublin headquarters, totaling roughly 20% of the entire office. Those impacted are said to be in the finance, marketing and operations teams, among others. Two key executives in the India marketing team are also said to have been axed.
What was the market reaction?
The Meta share price was marginally higher at 1% after the news. The stock has now recovered remarkably well in 2023 and is up 99% since the start of the year, with the announced layoffs spiking the share price by 23% at the time.
But it’s been an otherwise difficult week for Meta’s stock. The Big Tech behemoth was forced to sell GIF company Giphy for a $53 million loss after the UK competition regulator first ordered Meta to sell the company in 2021, eventually winning the appeal against the decision last year. While Shutterstock’s share price was up 5% at the announcement, Meta was flat.
Meta was also subject to the largest GDPR fine in EU history last week after being ordered to pay €1.2 billion for violating GDPR when it moved European data to the US without sufficient safety guards. Meta’s share price was down 0.6% on that news.
Are other companies making layoffs?
The silver lining is that mass layoffs in tech appear to be slowing down: after the likes of Meta, Microsoft and Google announced their cost-cutting measures, we haven’t heard of any significant changes in the last few weeks. But that could all change should the economic environment decline further and advertising revenue for Big Tech companies is squeezed.
Another worrying trend for workers is companies announcing future layoffs and replacing the roles with AI automation. British telecoms company BT has become the latest to confirm that not only is it cutting a huge 55,000 roles across its business, but a fifth of those eliminated positions will be replaced with AI.
IBM made a similar announcement a few weeks ago, with CEO Arvind Krishna saying the company plans to slash up to 30% of non-customer-facing roles in favour of AI over the next five years.
It’s a worrying time all around for tech workers, especially as the debt-ceiling crisis drags down the stock market, sticky inflation persists and talks of a recession haven’t abated.
Have Big Tech’s layoffs been successful?
So far Meta’s stock has been boosted by Zuck’s ‘year of efficiency’ buzz and a pivot from the metaverse (are they regretting the name change?) to AI, announcing a host of new features for Facebook Messenger and WhatsApp. But now the layoffs are concluded, Meta needs to show demonstrable improvement to justify laying off thousands of employees.
The mood at Meta is said to be dour. Employees have reported that Meta’s roadmap for the rest of the year still hasn’t been announced internally, while at an internal town hall meeting, employees asked why they should have confidence in Zuckerberg’s leadership.
And it’s not just Meta that’s feeling the tension with its employees. Tech workers at Amazon are said to be organizing a walkout next week to demonstrate frustration at mass layoffs and return-to-office mandates. Google workers in London staged a walkout in April over the 12,000 roles the search engine giant was cutting, while Microsoft is reportedly facing employee backlash after it scrapped pay raises and told workers to improve the company’s stock performance instead.
While the markets have rewarded Big Tech with share price increases, the damage is done with its workers. As a sense of betrayal tears through the companies, Big Tech may find smaller companies benefiting from the talent they trained up instead.
The bottom line
Meta’s layoffs have repeatedly proven to be a winner with Wall Street: the stock has risen 157% since the layoffs were first announced last year. But now those job losses are reaching their close, Meta’s in a somewhat tricky position: it has to prove the ‘year of efficiency’ is actually working.
Meta has nothing to worry about in its following earnings report if it has. But if not, the impact on the stock price could be brutal. Meta also needs to bring in line the growing resentment from the survivors left behind, which could prove more troublesome than it realises: after all, this is the first time Meta has ever had to conduct layoffs. Investors will be keenly watching to see what happens.
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