Admitting his mistakes in a letter to employees, Meta Platforms Chief Executive Mark Zuckerberg on Wednesday said the company would slash about 11,000 jobs, coming amid unprecedented challenges and its multibillion-dollar investment in a new digital world called the metaverse. Meta stock climbed.
The job cuts involve 13% of Meta's workforce, and will include the extension of a hiring freeze through the first quarter and cuts to discretionary spending.
"I want to take accountability for these decisions and for how we got here," Zuckerberg said in the letter.
"I know this is tough for everyone, and I'm especially sorry to those impacted." he said. "This is a sad moment, and there's no way around that."
Laid-off employees will receive a base 16 weeks of pay. They also will receive two additional weeks salary for every year of service and health coverage for six months.
Meta stock climbed 5.2%, closing at 101.47 on the stock market today.
META Stock: Reasons For The Layoffs
The layoffs are the biggest in the company's history by a large margin. They underscore the financial pressure the tech giant faces as it pivots its business toward the metaverse.
Zuckerberg laid out his reasons about what went wrong, beginning with the impact wrought by Covid-19.
"The world rapidly moved online and the surge of e-commerce led to outsized revenue growth," he said. "Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected."
The layoffs come as Meta and other social media companies were hit by a sharp slowdown in digital ad spending. The slowdown was a result of a weakening economy, inflation and rising interest rates. In addition, Apple made privacy changes to its operating system, which made it harder for advertisers to profile users.
"Fundamentally, we're making all these changes for two reasons," Zuckerberg said. "Our revenue outlook is lower than we expected at the beginning of this year, and we want to make sure we're operating efficiently across both Family of Apps and Reality Labs. This will add up to a meaningful cultural shift in how we operate."
Following Twitter's Lead
The round of layoffs by Meta follows that of rival Twitter. The new owner of privately held Twitter, Tesla Chief Executive Elon Musk, is cutting half of its staff, or 3,700 people. But reports said Twitter asked some laid off workers to come back.
Further, Amazon last week said it would pause corporate hiring. Among other companies, ride-hailing company Lyft said it would cut 700 jobs, about 13% of its workforce.
Also, Stripe expects to cut 14% of staff. Snap and Salesforce have also recently shed workers.
Meta stock is down 70% this year.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
