Meta to lay off over 11,000 employees including in VR Reality Labs division

Meta's CEO Mark Zuckerberg
(Image credit: Meta)
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In a message to employees today, Mark Zuckerberg, CEO of Meta, told staff that the company will be letting go of 13% of its workforce. That's more than 11,000 people. The cuts will cover multiple departments at the company, but has been confirmed to also include Reality Labs, which is the division in charge of Meta's VR and AR efforts.

I got this wrong.

Mark Zuckerberg

"While we're making reductions in every organization across both Family of Apps and Reality Labs, some teams will be affected more than others. Recruiting will be disproportionately affected since we’re planning to hire fewer people next year. We're also restructuring our business teams more substantially," Zuckerberg says (opens in new tab).

Zuckerberg cites online growth during Covid-19, and the subsequent decline Meta has experienced, as the primary cause for the decision. Zuckerberg notes it was his own mistakes in forecasting that lead to Meta laying off thousands of employees.

"At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected.

"Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I'd expected. I got this wrong, and I take responsibility for that."

Meta made $27.7 billion in revenue for the previous quarter (opens in new tab) and its latest earnings, $4.3 billion of which was net income.

Compared to that same period last year, Meta is down 4% year-over-year for revenue. Total costs and expenses were also up. Some of that will be down to increased spending on its Reality Labs division, as it made $285 million in the past three months but spent $3,672 billion. That's over a billion dollars a month in expenses for future VR, AR, and metaverse things.

An image of Mark Zuckerberg and a colleague showing off their legs in the metaverse

Meta continues to push its idea of a metaverse for socialising and working. (Image credit: Meta)

Meta seemingly remains committed to its metaverse plan, and if that's the case, I wonder how great the impact of these cuts will be on the Reality Labs division. It's tough to ignore the weight it has on the company's financials while it's still unable to turn a profit, or anything close. In recent comments by company executives, Meta has been trying to soften up its shareholders expectations for Reality Labs in the coming months and years, including noting that its next-gen Quest VR headset (opens in new tab) will arrive next year.

"We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year. Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run."

A statement reiterated once again in Meta's most recent Form 8-K submission (opens in new tab) with the SEC noting the mass layoffs.

Now, Meta has to make good on its goals with considerably fewer employees. Yet in the short term, Meta shares are likely to increase in value.

Speaking to The Guardian (opens in new tab), Susannah Streeter, an analyst at Hargreaves Lansdown and ex-BBC journalist, says Meta faces a "monumental task" to "claw back revenue".

"At the same time Meta funds are being poured down into the dark plumbing of the metaverse, and it’s highly unclear when revenues will emerge from this expensive venture," Streeter says.

These layoffs arrive only days after cuts of a similar ilk were announced at Twitter, at the behest of new owner Elon Musk. Musk's layoffs aimed to cut nearly 50% of Twitter's workforce. Bloomberg (opens in new tab) has since claimed that some asked to leave are now being asked to return, which suggests a shocking level of shortsightedness in the original decision.

Meta Quest 2 headset lenses up-close

The Meta Quest 2 is one of the most popular VR headsets, but there's a long way to go before mainstream adoption. (Image credit: Future)

Meta couldn't have asked for a better distraction from its own massive layoffs than Musk's bumbling ones, which has already kicked off legal action (opens in new tab). In any case, the most imminent cause for concern right now is for the thousands of employees now left trying to find employment during a tough economic period across the board.

Intel is also expected to announce thousands of job cuts soon, with CEO Pat Gelsinger confirming a cost reduction plan that would include "people actions" to Reuters (opens in new tab)

These cuts come amid a tumultuous few months for many tech companies, with the likes of Nvidia, Intel, and AMD in the PC gaming industry all reporting lower than expected earnings.

Jacob Ridley
Senior Hardware Editor

Jacob earned his first byline writing for his own tech blog from his hometown in Wales in 2017. From there, he graduated to professionally breaking things as hardware writer at PCGamesN, where he would later win command of the kit cupboard as hardware editor. Nowadays, as senior hardware editor at PC Gamer, he spends his days reporting on the latest developments in the technology and gaming industry. When he's not writing about GPUs and CPUs, however, you'll find him trying to get as far away from the modern world as possible by wild camping.