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Could more Meta layoffs mean the company still has bloat to trim — or could it signal its AI investments are actually starting to pay off?A note from a top Wall Street analyst said on Monday that any head count cutting from Meta could actually be a sign that it's successfully rebuilding itself as an "AI-forward" company.
That could be bad for its rivals.While Meta's deep investment in AI has so far not produced leading models like Google's and OpenAI's, Bernstein's Mark Shmulik said Meta's aggressive push to overhaul itself into a top-to-bottom AI company could put it ahead of competitors and trigger a "wave of panic" as competitors scramble to copy it.Meta is pouring hundreds of billions of dollars into building out AI data centers and luring talent to shore up its AI research teams. Last week, Business Insider reported the company was weighing up layoffs, with some managers being asked to draw up cost-cutting plans.Bernstein's Shmulik said this could be a signal that Meta is winning on a crucial front in the AI wars. While companies can win with world-class frontier models, they can also beat the competition by deploying AI so deeply across the core business that their competitive moat "widens beyond dispute," Shmulik wrote."Meta has already demonstrated the compelling returns they're seeing from deploying AI to core workloads," wrote Shmulik. "But if the company can now re-design their operations from the ground up to be AI-forward, their potential cost and performance advantage could be insurmountable."By one metric, Zuckerberg's efficiency drive over the past three years has paid off. Revenue per employee has steadily increased over that time period, with the company overtaking Amazon last year, according to data shared in the Bernstein note this week. Pinterest was the only company with a higher ratio.At the same time, Meta's capex and R&D spend per employee have significantly outpaced rivals, according to the Bernstein report, which could point to a reason for the potential layoffs.Investors appeared to react positively to Meta weighing up further cuts, with the company's shares up about 2% early Monday.Like other Big Tech companies, Meta has moved quickly to chase AI.It has also been aggressively driving AI adoption internally. The company said it would start grading employees on their "AI-driven impact" in performance reviews starting this year, and has tracked how some teams have been using the tools, Business Insider previously reported.Companies including Atlassian and Block have cited AI as a reason for recent layoffs, raising the question of whether some leaders are "AI-washing" and using the technology to camouflage other reasons for cuts, such as financial problems or overhiring during the COVID pandemic.Bernstein's Shmulik said that while AI-washing was possible in Meta and other companies' cases, he said that layoffs could now be seen as evidence that the company is seeing efficiency gains.The company eliminated more than 20,000 jobs in late 2022 and early 2023 as Zuckerberg declared a "year of efficiency," cutting non-technical roles, flattening management layers, and lifting what had been a sagging share price.If Meta repeats a similar cycle for the AI era, it could set the mold for what a truly AI-first company could look like, Shmulik said."If one major player is able to redraw the blueprint for an AI-enabled organization, others will rush to replicate it... and we wonder if this could trigger a cascade of hurried pivots, half-formed strategies, and reactive restructuring across the ecosystem," he wrote.Have something to share? Contact this reporter via email at hlangley@businessinsider.com or Signal at 628-228-1836. Use a personal email address and a non-work device; here's our guide to sharing information securely.
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