Why did Meta reduce 5% of its workforce…and how does this affect the company?

Meta is set to cut about 5% of its workforce, focusing on the company’s lowest-performing employees, NBC has confirmed.
CEO Mark Zuckerberg informed employees of the decision to “cut underperforming employees” in a memo posted on the company’s internal Workplace forum.
Zuckerberg explained the “gentle” elimination of idle employees at the beginning of 2025 by saying that he wants the company to perform better without the slackers, saying that the year “will be a strong, busy year.”

End of service bonus

Meta said that employees affected by the layoffs will be notified by February 10th and will receive an end-of-service bonus in line with what the company previously provided.
The cuts represent the largest layoffs at Meta since it cut 21,000 jobs, or nearly a quarter of its workforce, in 2022 and 2023.
Europe forces Meta to reduce the subscription price for Facebook and Instagram by 40%

Closer relations with Trump

Bloomberg Network was the first to report the news of the labor cuts, citing an internal memo.
This move comes in the wake of several major operational changes within Meta with the aim of building closer relationships with President-elect Donald Trump.
Last week, Zuckerberg announced that his company would end its fact-checking program in favor of the “community feedback” model used on Elon Musk’s X platform.
“The recent election also appears to be a cultural turning point toward prioritizing discourse again, so we will go back to our roots and focus on reducing mistakes, simplifying our policies, and restoring freedom of expression on our platforms,” Zuckerberg said in a video announcement.
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Reducing “meta” employees

The reduction of employees means the abandonment of approximately 3,600 jobs in February, while Meta shares fell by 2.3% as a result of the news of the reduction and was affected by it, because despite the announcement of an end-of-service bonus for employees, the matter only affected the negative side because the number is not small at all.

Third quarter earnings report

Based on its third-quarter earnings report, Meta employs approximately 72,404 employees worldwide, which means the cuts could affect approximately 3,600 workers.
The memo indicated that affected employees would receive a “generous severance package” in line with previous reductions.

Giant technology companies

Giant technology companies have intensified competition in the field of artificial intelligence since Microsoft launched GBT Chat through its original innovator, OpenAI, in March 2023.
The huge investment in developing data centers has squeezed profit margins, and although Meta reported strong profits for the quarter ending in September, the growth of its annual net income has slowed significantly.
Meta expects significant growth in capital expenditures in 2025 and a significant acceleration in infrastructure expenditure growth next year.”

Second round of layoffs

The announcement marks the second major round of layoffs after a 25% workforce reduction in 2023 that saw nearly 21,000 jobs eliminated.
CEO Mark Zuckerberg described 2023 as a “year of efficiency” after a difficult 2022 during which the company’s shares fell more than 60%.
In contrast, 2024 was profitable for Meta as its shares rose 67% due to the AI ​​boom and a more favorable macroeconomic environment.

Metaverse project

The controversial Metaverse project continued to weigh on its growth with the Reality Labs division reporting a loss of $12.76 billion during the first nine months of 2024.
The company expects “operating losses in 2024 to increase significantly year-over-year due to continued product development efforts and investments to further expand its ecosystem.”
Meta is scheduled to release its fourth-quarter and full-year earnings results on January 29, as investors monitor the company’s core business, especially AI-powered advertising, which contributes more than 90% of total revenue.