meta is going to lay off 13% of its staff, or more than 11,000 employees, CEO Mark Zuckerberg said in a letter to employees on Wednesday.
“Today I’m sharing some of the most difficult changes we’ve made in Meta’s history,” Zuckerberg said in the letter. “I have decided to reduce the size of our team by approximately 13% and let go of more than 11,000 of our talented employees. We are also taking some additional steps to become a leaner and more efficient company by cutting back on discretionary expenses and expansion of our staff shutdown through Q1.”
Shares of Meta rose about 4% in premarket trading.
The layoffs come at a difficult time for Facebook parent company Meta, which in late October provided lukewarm guidance for its pending fourth-quarter earnings that startled investors and caused its shares to fall nearly 20%.
Investors were concerned about Meta’s rising costs and expenses, which rose 19% year-over-year to $22.1 billion in the third quarter. The company’s total revenue declined 4% in the quarter to $27.71 billion, while operating income fell 46% from the prior year to $5.66 billion.
“I want to take responsibility for these decisions and for how we got here. I know this is difficult for everyone, and I am especially sorry for those affected.” said Zuckerberg.
He said Meta is shrinking in every organization, but recruitment will be disproportionately affected as the company plans to hire fewer people by 2023. The company extended the hiring freeze through the first quarter, with few exceptions, Zuckerberg said.
“This is a sad moment, and there is no way around it. To those who are leaving, I want to thank you again for everything you have put into this place,” he added.
Affected workers will receive 16 weeks of pay plus two additional weeks for each year of service, Zuckerberg said. Meta covers health insurance for six months.
Meta invests heavily in the metaverse, which generally refers to a yet-to-be-developed digital world accessible to virtual reality and augmented reality headsets. This hefty gamble has cost Meta $9.4 billion so far in 2022, and the company expects losses “to increase significantly year-over-year.”
Speaking to analysts as part of his third quarter earnings report, Zuckerberg said that Meta plans to “focus our investments on a small number of high-priority growth areas over the coming year.”
“That means some teams will grow significantly, but most other teams will remain flat or shrink over the next year,” Zuckerberg said. “In total, we expect 2023 to end up being roughly the same size, or even a slightly smaller organization than we are today.”
At the end of September, Meta has more than 87,000 employees.
Here is Mark Zuckerberg’s letter to employees:
“Today, I’m sharing some of the most difficult changes we’ve made in Meta’s history. I’ve decided to reduce the size of our team by approximately 13% and let go of more than 11,000 of our talented employees. We’re also taking a number of additional steps to become a leaner and more efficient company by cutting back on discretionary spending and extending our hiring freeze until the first quarter.
I want to take responsibility for these decisions and for how we got here. I know this is hard for everyone, and I’m especially sorry for those affected.
How did we get here?
With the onset of Covid, the world quickly went online and the rise of e-commerce led to exorbitant revenue growth. Many people predicted that this would be a permanent acceleration that would continue even after the pandemic was over. So did I, so I made the decision to significantly increase our investments. Unfortunately, this did not go as I expected. Not only has online commerce reverted to previous trends, but the macroeconomic downturn, increased competition and loss of advertising signals have left our earnings much lower than I expected. I misunderstood this and I take responsibility for that.
In this new environment, we need to become more capital efficient. We’ve moved more of our resources into a smaller number of high-priority growth areas, such as our AI discovery engine, our advertising and business platforms, and our long-term vision for the metaverse. We’ve cut costs across our business, including scaling back budgets, reducing benefits and reducing our real estate footprint. We restructure teams to increase our efficiency. But these measures alone won’t align our spending with our revenue growth, so I’ve also made the tough decision to let people go.
How will this work?
There is no right way to resign, but we hope to provide you with all the relevant information as soon as possible and then do everything we can to support you in doing so.
Everyone will receive an email shortly letting you know what this layoff means to you. After that, each employee involved will have the opportunity to talk to someone to answer their questions and participate in information sessions.
Some details in the US are:
- severance pay. We pay 16 weeks of base salary plus two additional weeks for each year of service, with no cap.
- PTO shaft. We pay for any remaining PTO time.
- RSU unconditional. All those involved will receive their unconditionality on November 15, 2022.
- Health insurance. We cover the costs of health care for people and their families for six months.
- Career Services. We provide three months of career support from a third-party vendor, including early access to unpublished job opportunities.
- immigration support. I know this is especially difficult if you are here on a visa. There is a termination notice and some visa-free periods, meaning everyone has time to plan and work through their immigration status. We have dedicated immigration specialists to assist you based on what you and your family need.
Outside of the US, support will be similar, and we’ll be pursuing separate processes soon that take into account local labor laws.
We have made the decision to remove access to most Meta systems for people leaving today, given the amount of access to sensitive information. But we keep the email addresses active all day so that everyone can say goodbye.
While we are making cuts in both Family of Apps and Reality Labs in every organization, some teams will be affected more than others. Recruitment will be disproportionately affected as we plan to hire fewer people next year. We are also restructuring our business teams more substantially. This is not a reflection of the great work these groups have done, but of what we need for the future. The leaders of each group will schedule time over the next few days to discuss what this means for your team.
The teammates who will leave us are talented and passionate and have had a significant impact on our company and our community. Each and every one of you helped make Meta a success, and I’m grateful for that. I’m sure you’ll start doing great work in other places.
What other changes are we making?
I see layoffs as a last resort, so we’ve decided to curb other sources of costs before letting teammates go. All in all, this will lead to a meaningful cultural shift in the way we work. For example, now that we are reducing our real estate footprint, we are moving to desk sharing for people who already spend most of their time outside the office. We will be making more of these cost-saving changes in the coming months.
We are also extending our hiring freeze through the first quarter, with a few exceptions. I’m going to look at our business performance, operational efficiency and other macroeconomic factors to determine if and how much we should resume at that point. This gives us the ability to manage our cost structure in the event of an ongoing economic downturn. It will also set us on the path to achieving a more efficient cost structure than we have recently outlined to investors.
I’m currently doing a major overhaul of our infrastructure spending. As we build our AI infrastructure, we aim to become even more efficient with our capacity. Our infrastructure will continue to be a key asset to Meta, and I believe we can achieve this with less spending.
Essentially, we’re going through all of these changes for two reasons: our revenue outlook is lower than we expected at the start of this year, and we want to make sure we’re working efficiently in both Family of Apps and Reality Labs.
How do we move forward?
This is a sad moment, and there’s no getting around it. To those who are leaving, I want to thank you again for everything you have put into this place. We wouldn’t be where we are today without your hard work, and I’m grateful for your contributions.
For those who remain, I know this is a difficult time for you too. Not only are we saying goodbye to people we’ve worked closely with, many of you are also feeling uncertainty about the future. I want you to know that we make these decisions to ensure that our future is strong.
I believe that as a company we are deeply underestimated today. Billions of people use our services to connect, and our communities continue to grow. Our core businesses are among the most profitable ever built with huge potential ahead of us. And we are at the forefront of developing the technology to shape the future of social connections and the next computing platform. We do historically important work. I am convinced that if we work efficiently, we will emerge from this downturn stronger and more resilient than ever.
We’ll be sharing more in the coming weeks about how we will work as a streamlined organization to achieve our priorities. For now I say once again how grateful I am to those of you who are leaving for all you have done to advance our mission.
Watch: Meta needs to get back to their core advertising and doubling business.