Do more job cuts at Meta mean the company still has bloat to cut, or does it indicate that its investments in AI are really starting to pay off?
A Monday note from top Wall Street analysts said Meta’s job cuts may actually be a sign that Meta is succeeding in rebuilding itself as an “AI-advanced company.”
That could be bad for rivals.
While Meta’s heavy investments in AI have so far not produced a strong model like Google or Open AI, Bernstein’s Mark Schmulik said Meta’s aggressive efforts to reinvent itself into a top-to-bottom AI company could put Meta ahead of its competitors and cause a “wave of panic” as competitors scramble to copy it.
Meta is pouring hundreds of things We are investing billions of dollars to build AI data centers and hire talent to power our AI research teams. Last week, Business Insider reported that the company was considering layoffs and that some executives were being asked to come up with cost-cutting plans.
Bernstein’s Shmulik said this could be a signal that the meta is winning on important fronts in the AI wars. Companies can win with world-class frontier models, but they can also win by deploying AI deeply across their core businesses, and the competitive moat “indisputably widens,” Shmulik wrote.
“Meta has already demonstrated the compelling benefits of bringing AI to core workloads,” Shmulik wrote. “But if companies can fundamentally redesign their operations to power AI, the potential cost and performance benefits may be insurmountable.”
By one measure, Zuckerberg’s efficiency efforts over the past three years have paid off. Sales per employee rose steadily over the period, and the company overtook Amazon last year, according to data shared in a Bernstein memo this week. Only Pinterest had a higher percentage.
At the same time, Meta’s capital and R&D spending per employee is significantly higher than its competitors, according to Bernstein’s report, which could point to potential layoffs.
Investors appeared to be reacting positively to Meta’s consideration of additional cuts, with shares up about 2% early Monday.
AI cleaning? Probably not.
Like other Big Tech companies, Meta moved quickly to go after AI.
We are also actively promoting the introduction of AI within the company. The company announced it would start evaluating employees based on “AI-driven impact” in performance reviews this year, and is tracking how some teams use the tool, Business Insider previously reported.
Companies such as Atlassian and Block have cited AI as a reason for recent job cuts, raising questions about whether some leaders are conducting “AI washes” and using technology to camouflage other reasons for layoffs, such as financial issues or overhiring during the coronavirus pandemic.
Bernstein’s Schmulik said AI cleansing is a possibility at Meta and other companies, but layoffs could now be seen as evidence the company is realizing efficiency gains.
The company cut more than 20,000 jobs between late 2022 and early 2023 as Mr. Zuckerberg declared a “year of efficiency,” cutting non-technical roles, flattening the management hierarchy and boosting the company’s flagging stock price.
If Meta repeats a similar cycle in the AI era, it could set the prototype for what a true AI-first company looks like, Shmulik said.
“If one major company can redraw the blueprint for an AI-enabled organization, others will rush to replicate it…and we wonder if this could trigger a cascade of hasty pivots, half-baked strategies, and reactive restructuring across the ecosystem,” he wrote.
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