Updated at 6:40 am EST
Meta Platforms (META) – Get Free Report said Wednesday it will layoff around 11,000 people, or 12.5% of its global workforce, marking the first major round of job cuts in company history amid mounting losses in its metaverse project and a pullback in ad spending that continues to hit sales at its flagship Facebook division.
CEO Mark Zuckerberg unveiled the cuts in a letter to employees Wednesday, which was published alongside filings with the Securities and Exchange Commission, telling staff that he “got this wrong” in terms of anticipating a firmer comeback for ad spending that would absorb the more than $9.4 billion in red ink spilled from Reality Labs over the first nine months of the year.
Meta said it will pay a sixteen week base salary to laid-off employees, while adding another six months to their healthcare benefits. Staff holding stock or options will also see those investments vested on November 15, Meta said.
“Today I’m sharing some of the most difficult changes we’ve made in Meta’s history: I’ve decided to reduce the size of our team by about 13% and let more than 11,000 of our talented employees go,” Zuckerberg said. “We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.”
“I want to take accountability for these decisions and for how we got here,” he added. “I know this is tough for everyone, and I’m especially sorry to those affected.”
Meta shares were marked 3.3% higher in pre-market trading following confirmation of the layoffs to indicate an opening bell price of $99.60 each, a move that would still leave the stock nursing a year-to-date decline of around 71.5%.
Late last month, Meta posted weaker-than-expected third quarter earnings and cautioned that its metaverse division would post deeper net losses over the coming year.
Meta said it would “meaningfully” ramp-up investments in Reality Labs, the division that will house the company’s metaverse plans and has absorbed more than $9.4 billion in losses over the first nine months of the year, as the social media group continues to transition from its Facebook roots.
The choice to double-down on the expensive enterprise, which will add at least another $4 billion to next year’s capital spending plans — now pegged at between $30 billion to $34 billion for the coming year — more than offset some modest positives from Meta’s underlying social media business.
Looking into the final three months of the year, Meta said it sees revenues in the region of $30.0 billion to $32.5 billion, a range that falls below the Street forecast of $32.3 billion.
“In this new environment, we need to become more capital efficient. We’ve shifted more of our resources onto a smaller number of high priority growth areas. We’ve cut costs across our business. We’re restructuring teams to increase our efficiency,” Zuckerberg said. “But these measures alone won’t bring our expenses in line with our revenue growth, so I’ve also made the hard decision to let people go.”