March 16 (Reuters) - Meta Platforms shares rose 3% on Monday following a Reuters report that the social media giant plans to lay off 20% or more of its workforce to offset heavy spending on artificial intelligence and bet on productivity gains from the technology.
If Meta settles on the 20% figure, the cuts will be the biggest since a late 2022 and early 2023 restructuring it dubbed the "year of efficiency", which eliminated around 21,000 jobs.
After falling behind in the AI race, Meta has spent heavily in recent years to catch up by building data centers and waging a talent war. It expects a capital outlay of up to $135 billion in 2026, roughly double of last year's spending.
The expenditure is meant to secure the cloud capacity needed to train and run AI models, and Meta will spend up to $27 billion for such services from Nebius under a deal on Monday.
While the spending has powered improvements in Meta's ad-tools and boosted sales, it has yet to roll out an AI model that can challenge industry leaders OpenAI, Anthropic and Google.
Meta has been working on a new model called Avocado, but the performance of that model has also lagged expectations.
A 20% staff cut could amount to about $6 billion in cost savings, or a 5% boost to adjusted core earnings, Rosenblatt Securities analyst Barton Crockett said.
"This doesn't have to stop at 20%. There could be more down the road if AI is truly this impactful on staff productivity."
Meta, whose workforce totaled 79,000 at the end of December, said on Friday, "this is speculative reporting about theoretical approaches" in response to Reuters' request for comment.
Its stock was trading at $631.5 premarket. It has declined 7% so far this year, after rising nearly 13% in 2025.
AI LAYOFFS ON THE RISE
AI-linked layoffs have been rising globally. Companies have announced more than 61,000 job cuts tied to AI, including Amazon and Australia's Wisetech, since November.
The debate over AI replacing human workers has intensified after Block CEO Jack Dorsey last month unveiled plans to let go nearly half of his company's staff, saying the technology has changed "what it means to build and run a company."
Some analysts have noted that the layoffs also follow a period of over-hiring at companies. OpenAI CEO Sam Altman said last month that some companies were blaming AI for the job cuts they would have made anyway.
"Is AI a convenient scapegoat for cuts that might have happened anyway? Perhaps. But we believe the market will quickly see through companies using AI as camouflage," Bernstein analyst Mark Shmulik said in a note.
He added that Meta was "probably the best placed incumbent to pivot to an AI-enabled organization", pointing to the success of its post-pandemic restructuring.
(Reporting by Aditya Soni in Bengaluru; Editing by Shinjini Ganguli)
