To offset its aggressive capital expenditures on moonshot projects, Meta Platforms (META) is cutting the lowest-performing staff. The company will cut 5% of employees rated as low performers. It will backfill those positions later in the year.
The cost-cutting plan is good for META stock. CEO Zuckerberg is running Meta as a well-run business.
Meta Platforms closed near its high for the year. However, the market capitalization of $1.8 trillion trails the Magnificent Seven technology stocks. At the top of the list is Apple (AAPL) at $3.4 trillion, Nvidia (NVDA) at $3.18 trillion, and Microsoft at $3.0 trillion.
Risk
Staff morale may worsen. Productivity will likely worsen for departments that work in divisions that do not make money. For example, the Metaverse lost around $4.5 billion in Q2/2024 and around $50 billion since late 2020.
Meta spent around $39 billion to support its AI efforts. Although costs must increase as competition increases, Meta may cut staff levels in the AI division.
Related Investments
Investors may consider holding Alphabet (GOOG), whose Gemini AI Studio shows promise. GOOG stock fell by around 9% last week after it posted quarterly results. The company’s CEO, Sundar Pichai, reported progress in AI infrastructure. That includes the Gemini 2.0 models that Alphabet is integrating across its products.
