Meta Platforms (NASDAQ:META) stock is trending and up 5% today on reports that the company is planning to announce massive layoffs in the coming days. This news follows a difficult third-quarter earnings print.
Specifically, The Wall Street Journal and New York Times each reported that Meta is planning to announce large-scale staff cuts after missing analysts’ Q3 expectations. Now, investors are applauding the news. They see the move as a much-needed cost control measure as Meta continues to spend heavily on metaverse technologies.
Before today, META stock was down more than 70% year-to-date (YTD), closing at $90.79 per share last Friday. The tech stock has been one of the worst performers in the S&P 500 this year.
What’s Happening With META Stock?
The exact number of staff to be cut has not been announced by Meta Platforms. However, these layoffs are expected to impact thousands of employees across the company’s global operations. As of the end of September, Meta Platforms had nearly 90,000 employees around the world.
If they do happen, these cuts would represent one of the most significant headcount reductions in Meta’s 18-year history. Until now, the company has steadily grown its ranks. However, in a recent Q3 earnings call with media and analysts, CEO Mark Zuckerberg said the company expects “to end 2023 as either roughly the same size, or even a slightly smaller organization than we are today.”
Why It Matters
These layoffs come as Meta Platforms spends heavily on metaverse technologies, even as other parts of its business suffer a sharp slowdown. In late October, the company announced a 50% decline in its quarterly profit as well as the second consecutive quarter of sales declines. These were mainly due to a slowdown in online advertising at Meta’s social media sites, including Facebook, WhatsApp and Instagram.
At the same time, Meta has dedicated $70 billion to developing various metaverse technologies. However, it has not yet earned any meaningful revenue from this work. As a result, many analysts have called for the company to scale back spending, reduce costs and focus on monetizing its core social media platforms.
Meta Platforms is not the only Big Tech name to plan workforce reductions amid slowing growth this year. Last week, Amazon (NASDAQ:AMZN) announced that it will halt all corporate hiring heading into 2023. As the new owner of Twitter, Elon Musk also just fired half of Twitter’s staff.
Looking forward, investors will have to wait and see how significant Meta Platforms’ job cuts are. Still, today’s reaction to the news is a clear indication that META stock investors feel the cuts are necessary amid rampant spending and mounting losses.
On the date of publication, Joel Baglole did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.