meta platforms ceo Mark Zuckerberg

Facebook parent Meta Platforms (NYSE: META) is reportedly looking to lay off thousands of employees. The reports come amid the sump in Meta Platforms stock and the pressure from stockholders to cut costs and slash the capex budget.

The Wall Street Journal reported that this week, Meta Platforms might announce thousands of layoffs. It said that while in percentage terms they would be lower than those at Twitter, which has cut its workforce by around half after Elon Musk took over, in absolute terms, they could be the biggest round of tech layoff this year.

To be sure, almost all tech companies are either going slow on hiring or looking at cutting their workforce. Things have been even bleak for social media companies like Snap and Meta Platforms as they grapple with a weak ad market. Snap has also fired many of its employees as growth has stalled.

During the third quarter earnings call, Meta Platforms’ CEO Mark Zuckerberg said that the company would slow down the pace of hiring. He said, “In 2023, we’re going to focus our investments on a small number of high priority growth areas.”

He added, “That means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year. In aggregate, we expect to end 2023 as either roughly the same size, or even a slightly smaller organization than we are today.”

Meta Platforms Might Announce Large-Scale Layoffs

Meta Platforms’ shareholders have been calling upon the management to cut costs. The stock is not only the worst-performing FAANG stock of 2022 but is also the worst-performing S&P 500 stock. In absolute terms, the social media giant has lost over $750 billion in market cap from its last year’s peaks.

Altimeter Capital Chair Brad Gerstner, whose firm is a Meta Platforms shareholder, last month an open letter to the company where he made three suggestions.

Firstly, he said that the company should lower its headcount by 20%. Secondly, he said that Meta Platforms should lower its annual capex from $30 billion to $25 billion. Finally, he said that the company should not spend more than $5 billion annually on building the metaverse. Reportedly, the initial performance of Meta’s metaverse business hasn’t been satisfactory.

However, during the earnings call, Meta Platforms did not talk about large-scale layoffs. In anything, it said that losses at the Reality Labs segment, which is building the metaverse, would rise significantly in 2023.

The segment lost $3.67 billion in Q3 2022. In the third quarter of 2021, it had lost $2.63 billion. The Reality Labs segment has almost lost $10 billion this year with one quarter to spare.

Is Mark Zuckerberg Listening to the Markets Finally?

During the third quarter earnings call, a lot of analysts questioned Meta Platforms on the cash-guzzling metaverse business. Brent Hill, an analyst with Jefferies asked “I think kind of summing up how investors are feeling right now is that there are just too many experimental bets versus proven bets on the core. And I’m curious if you can just add more color why you don’t feel these are experimental.”

Zuckerberg responded, “I just think that there’s a difference between something being experimental and not knowing how good it’s going to end up being.” He however emphasized, “But I think a lot of the things that we’re working on across the family of apps, we’re quite confident that they’re going to work and be good.”

He admitted that a lot of people disagree with the massive metaverse investments. However, Zuckerberg added, “I think people are going to look back on decades from now and talk about the importance of the work that was done here.”

Metaverse is a long-term opportunity. Companies like Nvidia also see the metaverse as a key growth driver. We have a list of companies that are a play on metaverse.

Analysts Slashed Meta Platforms’ Target Price after the Earnings

After Meta Platforms’ Q3 2022 earnings, several analysts slashed their target prices on the stock. Amazon also missed consensus revenue estimates in the quarter and several analysts lowered its target price following the earnings release. Most analysts however remain bullish on Amazon stock. We have a guide on buying Amazon stock.

As for Meta Platforms, Zuckerberg finally seems to be listening to the markets on controlling costs. Would he also cut down on metaverse investments? We’ll have to wait and see.

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