Meta, Facebook's parent company, announced 11,000 layoffs on Wednesday, the most in company history, as it faces a variety of threats to its main business and undertakes a risky and expensive metaverse pivot.
Meta's jobs cut off follows a slew of layoffs at other tech firms as the high-flying sector adapts to high inflation, increasing interest rates, and recession concerns, according to CNN.
Tech Companies Suffer From Myriad of Troubles
In a blog post, CEO Mark Zuckerberg disclosed some of the most challenging adjustments in Meta's history, in which he decided to reduce the number of our workforce by around 13% or equivalent to estimated 11,000 employees. Zuckerberg stated in the post that Meta's recruiting staff will be hardest hurt by the job losses. With limited exceptions, a hiring freeze would last through the first quarter.
In September, Meta reported a headcount of more than 87,000, citing a September SEC filing. The company reported a 50% drop in earnings and a second quarterly revenue loss last month. Meta's market worth dropped from $1 trillion last year to $250 billion.
Shares of Meta surged 5% in premarket trade Wednesday on the announcement. Meta is not the only company suffering from a market downturn. Inflation, rising interest rates, and macroeconomic headwinds have caused a shocking shift in expenditure for the tech sector, which only grew more prominent as people spent more of their lives on social media during the pandemic.
Mark Zuckerberg said that when the world swiftly shifted online and e-commerce boomed during the early stages of the COVID-19 pandemic, he thought the trend would persist even after the pandemic, hence he decided to substantially increase company expenditures. But things did not go according to plan.
What's Next For Meta?
Twitter, a competitor of Facebook, announced widespread layoffs last week when Elon Musk gained control of the company. Meta's incredibly lucrative ad business has been squeezed by the rise of TikTok and modifications to Apple's privacy policy, while the company's investments in the emerging metaverse look increasingly unwise, The Verge reported.
So far in 2022, Meta has lost $9.4 billion on its metaverse technology, and the company claims it will continue to lose money. Meta's share price has plummeted as bad news has piled up.
Its market worth has decreased by $700 billion in recent weeks, and its stock price has fallen by more than 70% this year. The stock price of the business, however, increased by more than 4% in pre-market trade after Zuckerberg announced job layoffs.
At a conference call with investors for its third-quarter results report, Zuckerberg said the company would concentrate its investments on "a small number of high-priority growth areas" in the coming year, per CNBC.
The tech mogul expressed optimism that the adjustments will help the company recover eventually.
"I believe we are deeply underestimated as a company today. Billions of people use our services to connect, and our communities keep growing. Our core business is among the most profitable ever built with huge potential ahead. And we're leading in developing the technology to define the future of social connection and the next computing platform. We do historically important work. I'm confident that if we work efficiently, we'll come out of this downturn stronger and more resilient than ever," Mark Zuckerberg wrote in the announcement released by Meta.
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