In a message to employees today, Meta CEO Mark Zuckerberg said the company is letting go 13% of its workforce. This equates to more than 11,000 employees. The job cuts will be spread across several divisions of the company, but have been confirmed to include Reality Labs, the division responsible for Meta's VR and AR efforts.

"We are making cuts in all organizations across both Family of Apps and Reality Labs, but some teams will be affected more than others. Hiring will be significantly impacted as we plan to reduce the number of hires next year. We will also reorganize the business teams more significantly," Zuckerberg says (opens in new tab).

Zuckerberg cites the growth of online during Covid-19 and the subsequent decline Meta experienced as the main reasons for this decision. Zuckerberg notes that it was his own misprediction that led Meta to lay off thousands of employees.

"At the start of Covid, the world was rapidly moving online, and a surge in e-commerce led to a dramatic increase in revenue. Many predicted that this would be a permanent acceleration, even after the pandemic ended. I agreed and made the decision to significantly increase my investments. Unfortunately, this did not work out as I had hoped.

"Not only has online commerce returned to its previous trend, but the macroeconomic downturn, increased competition, and advertising signal loss have resulted in our revenues being much lower than I had anticipated. This was my mistake and I take full responsibility for it."

Meta's sales last quarter were $27.7 billion (open in new tab), with $4.3 billion in net income in the latest results.

Compared to the same period last year, Meta's revenues were down 4% year over year. Total costs and expenses have also increased. Part of this is likely due to increased spending on the Reality Labs division, which earned $285 million in the past three months but spent $3.672 billion. That's over $1 billion a month in spending for future VR, AR, and Metaverse stuff.

Meta seems to remain committed to the Metaverse plan, but if so, how big an impact will this cut have on the Reality Labs division? It is difficult to ignore the weight this division will have on the company's finances while still being unable to turn a profit, or close to it. In recent comments by company executives, Meta has tried to temper shareholder expectations for Reality Labs in the coming months and years, noting that the next-generation VR headset, Quest (opens in new tab), will be available next year.

"We expect Reality Labs' operating loss in 2023 to increase significantly year over year, and beyond 2023, we expect Reality Labs to increase the pace of its investments so that it can meet its goal of growing the company's overall operating income over time."

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This statement is also reiterated in Meta's latest Form 8-K filed with the SEC (opens in new tab) regarding the mass layoffs.

Currently, Meta must meet its goals with considerably fewer employees. In the short term, however, Meta's stock is likely to rise in value.

According to the Guardian (opens in new tab), Hargreaves Lansdown analyst and former BBC journalist Susanna Streeter says Meta faces a "tremendous task" of "getting back to profitability."

"At the same time, Meta's money is pouring into the dark plumbing of the Metaverse, and it is very unclear when it will be profitable from this expensive venture," says Streeter.

The layoffs come just days after similar job cuts were announced at Twitter, at the request of new owner Elon Musk. Musk's layoffs were intended to cut nearly 50% of Twitter's workforce; Bloomberg (opens in new tab) has since claimed that some who were asked to leave have now been asked to return, suggesting a shocking level of shortsightedness in the original decision .

For Meta, nothing could be more distracting from its own massive layoffs than Musk's ineptitude. In any case, the most pressing concern right now is the thousands of employees who are trying to find employment in an overall difficult economy.

Intel is also expected to announce thousands of job cuts soon, with CEO Pat Gelsinger confirming to Reuters (open in new tab) that cost-cutting plans include "human measures."

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