Like many other tech companies bracing for an increasingly certain recession, Meta, the parent company of Facebook, Instagram and WhatsApp, is reportedly predicting a wave of mass layoffs as early as this week.
The Wall Street Journal revealed on Sunday November 6 that according to sources close to the company, several thousand jobs would be affected, and an announcement is expected later this week.
WSJ sources also clarified that the management of Meta Platforms (ex-Facebook) had already frozen all non-essential travel, in anticipation of this layoff plan.
Recall that Meta, formerly Facebook, hired more than 27,000 employees in 2020 and 2021 combined, in the face of a sharp increase in its activity in the period of the pandemic, thanks to the confinements which largely increased the consumption of social media. The company now has approximately 87,000 employees worldwide in total.
But the end of the covid-19 effect with the reopening of most economies for several months, and the rise in central bank rates in a context of very high inflation, has suddenly darkened the picture for the company.
Moreover, the latest quarterly results published by Meta provided a stark illustration of the reversal of the situation that Meta has undergone in recent months. Q2 results released in July reported EPS of $2.46, versus 2.54 expected, and down sharply from $3.61 in the same quarter a year earlier.
And the Q3 results published two weeks ago were even worse, with EPS at $1.64 versus $1.93 expected, and compared to $3.22 a year earlier. This publication had caused a plunge of more than 20% of the action in a single session.
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During the company’s third-quarter earnings conference call, CEO Mark Zuckerberg said some teams will still grow.
However, he had already provided a clue as to the looming layoffs, confessing that most of Meta’s teams will “stay flat or shrink over the next year.”
“We expect to end 2023 being either about the same size or even a slightly smaller organization than we are today,” he said.
Still based on the Q3 results, we can assume that Meta’s setbacks are largely related to its efforts in the field of Metaverse.
Indeed, spending at its Metaverse division, Reality Labs skyrocketed, posting an operating loss of $3.7 billion for the period.
Elsewhere, Meta’s virtual world, known as Horizon Worlds, received mixed reception, with user numbers dropping to less than 200,000 over the course of the year.
“We expect Reality Labs’ operating losses in 2023 to increase significantly year over year,” the company also said at the time of publication.
“Beyond 2023, we plan to pace Reality Labs’ investments such that we can meet our goal of growing overall business operating profit over the long term,” the company added.
In other words, the Metaverse weighs down Meta’s accounts, but the company still intends to persist on this path. So the massive layoffs expected to be announced this week are part of Meta’s effort to fund its plan to become the leader of the Metaverse.
After all, it was to reflect these ambitions that the company changed its name to Meta Platforms in October 2021! But in the end, it is not guaranteed that it will succeed.
Indeed, the general public is wary of a virtual world dominated by Meta, given the company’s track record on privacy and data protection.
Moreover, the global trend towards decentralization in all areas, driven by the revolution of cryptocurrenciesalso makes the idea of a Meta-stamped metaverse unattractive…
In the end, the stock market setbacks of Meta Platforms could therefore continue as long as Mark Zuckerberg persists in wanting to dominate a metaverse that does not yet exist.
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