Meta's focus on efficiency including scaling back real estate over the past two years appears to be paying off as the Silicon Valley tech giant lowers its restructuring costs and pivots to hiring growth through the end of the year.
After years of trimming its workforce and its office space, the parent company of Facebook and Instagram based in Menlo Park, California, expects to "end 2024 with in-seat reported headcount that is meaningfully higher than where we ended 2023," Chief Financial Officer Susan Li told analysts during an earnings call on Tuesday, following the release of its second quarter earnings.
Revenue surged 22% during the second quarter to a better-than-expected $39.1 billion, sending shares up nearly 9% in early trading on Thursday. The company ended the first quarter with almost 70,800 employees, up 2% from the prior quarter.
In 2023, dubbed by co-founder Mark Zuckerberg as a so-called 'Year of Efficiency,' Meta cut a third of its workforce. Since 2022, the company and others like Google, Microsoft and Amazon have cut at least 440,000 employees. Meta terminated 21,000 positions alone in 2023, according to previous reporting by CoStar News.
As part of its office consolidation, Meta listed 133,000 square feet for sublease last year at 12105 W. Waterfront Drive in Playa Vista, California, as well as 434,000 square feet at 181 Fremont St. in San Francisco after a round of 11,000 job cuts.
AI Expenses
Meta pointed to lower restructuring costs in the second quarter — including office closings, severance and personnel costs, and other related expenses — as a driver of declining expenses, helping to partially offset the firm's most expensive category during the quarter of research and development. Costs in the category rose 13%, driven in part by infrastructure costs.
The firm isn't likely to back down from those R&D expenses through the rest of the year as it continues to invest in its artificial intelligence technology, and the real estate infrastructure to accommodate that growth.
The company expects its 2024 capital expenditures to range between $37 billion to $40 billion, up slightly from its prior expected range of $35 billion to $40 billion.
"While we continue to refine our plans for next year, we currently expect significant CapEx growth in 2025 as we invest to support our AI research and our product development efforts," Li said.
Large technology companies have been pouring billions of dollars into data centers to capitalize on the generative AI boom, even as they cut millions of square feet in office space.
In its second quarter earnings released on Wednesday, Microsoft said it spent $19 billion on projects to expand its Azure public cloud unit and AI products in the quarter that ended June 30, up from $10.7 billion for the same time a year earlier. Google parent Alphabet reported last week that it spent $13 billion in the second quarter to build data centers and other AI infrastructure.
"The big theme right now is, of course, AI," Zuckerberg said during the earnings call. "The engine that powers all these new [AI] experiences is the Llama family of foundation models. In this quarter we released Llama 3.1 which includes the first frontier level open source model as well as new and industry leading small and medium-sized models."
Meta executives didn't disclose its hiring goals for next year to meet demand from its ramped up AI investments, but Li said the company expects to "primarily target our hiring to focus on priority areas, and we will be running a very disciplined headcount process."