Surprise! Facebook Parent Meta Layoffs Seen Saving Only a Small Fraction of Losses
Meta Platforms Inc.'s first major job cuts won't be nearly enough to get the company back to being as profitable as it was just two years ago, according to analysts.
Meta laid off 11,000 workers on Wednesday. Chief Executive Officer Mark Zuckerberg said he bore responsibility for growing the company too quickly, on a failed bet that the increase in social media activity and online shopping during the pandemic would cometa jobntinue. “I got this wrong,” he said.
But at the end of a difficult day for thousands of employees, the company -- parent to social media giants Facebook, Instagram and WhatsApp -- is still facing many of the same problems it did a week ago, now with 13% fewer people.
Meta is under intense scrutiny after posting its first two quarters of revenue declines compared to the same periods last year. At the same time, spending forecasts for next year to keep its social media apps relevant and pursue its long-term bet on virtual reality ballooned, surprising analysts and driving the stock down to levels not seen in seven years.
“Although this is an encouraging start of being disciplined on spending and investments, we believe the company has more room to go,” James Lee, managing director at Mizuho Securities, wrote in a note to clients after the news of the layoffs.
Meta's profitability has fallen to a two-year low. Its operating margin has been sliding for several quarters to 20.4% at the end of September -- half of what it was at the end of 2020. While lowering the business's headcount will reduce spending, it may have to be one piece of a broader turnaround story, Lee said.
The job cuts will save the company $1.5 billion, Lee said, which is equal to just 1 point of operating margin. Compare that to
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