Facebook parent Meta said it will take a roughly $2 billion financial hit to close offices and scrap leases as revenue growth slows at the social media giant, a sign of the changes tech giants are undertaking as they adopt remote-work policies and face economic headwinds.
The Menlo Park, California-based company expects the spending for impairment costs for ending leases this year as it consolidates offices. Roughly $413 million of that was paid in the quarter ended Sept. 30, the company said Wednesday.
While Meta plans to boost investments in its data center footprint, it has closed some workspaces across the country to curb expenses and keep up with costs pursuing long-term investments in its creation of a virtual reality product known as the "metaverse." More such closings are expected.
"We have increased scrutiny on all areas of operating expenses," David Wehner, Meta's chief financial officer, told investors on the company's earnings call Wednesday, adding that the company will continue its work to "realign its office footprint" and slow the pace of hiring. "We're making significant changes across the board to operate more efficiently."
The company reported $27.7 billion in revenue for the third quarter, down more than 4% from the same time a year earlier. Meta posted a 1% decrease in revenue last quarter.
Meta is among a host of Silicon Valley tech giants making deep cuts to once-vast real estate portfolios by shutting down office locations, subleasing unwanted space, terminating prelease agreements and walking away from future investments.
The Facebook parent earlier this month closed an office at 225 Park Ave. in New York City and terminated a lease for two office buildings in Mountain View, California.
The moves have been a worrisome sign for the national commercial real estate market, which in cities such as San Francisco, New York, Seattle and Los Angeles has come to rely on blockbuster tech leases for rent growth, spillover demand and a source for investor confidence.
What's more, the move to pull back on real estate expenses come as businesses plan to slow the pace of hiring, one of the largest sources for most tech companies' years-long expansion.
Google parent Alphabet Inc., for example, said Tuesday it plans to slow hiring and only invest in employment growth on an as-needed basis.
Meta's Wehner said the company's efforts to operate more efficiently was expected to keep its headcount flat for the remainder of the year.
The company brought on 3,700 full-time employees in the third quarter, down from the 5,700 workers it hired for the same period last year. It said it had more than 87,000 employees at the end of September, a figure projected to remain steady as it moves through the rest of 2022 and into next year.