Meta says it's laying off staff and easing off hiring to reduce costs – but will keep pumping billions into Mark Zuckerberg's metaverse

Meta is cutting hiring and laying off staff to trim costs, CFO David Wehner said Wednesday.
Meta's headcount will remain roughly flat between now and the end of 2023, he said.
But Meta will continue pumping billions into its metaverse business, execs said Wednesday.

"We expect hiring to slow dramatically going forward," CFO David Wehner said in Meta's third-quarter earnings call. "We are holding some teams flat in terms of headcount, shrinking others, and investing headcount growth only in our highest priorities."

Meta expects its headcount to remain roughly flat between now and the end of 2023, Wehner said. The company had 87,314 employees as of September 30, a 28% increase year-over-year, according to its third-quarter earnings report, published Wednesday.

Some Meta employees previously told Insider they were concerned about layoffs, and that some staff had started making contingency plans.

Wehner said Meta's pace of hiring had slowed in the third quarter, with 3,700 net new hires compared with 5,700 in the second quarter. New hires were largely concentrated in technical and senior roles, Susan Li, Meta's VP of finance and incoming CFO, said.

Meta's metaverse will keep burning cash

Meta's third-quarter net income crashed 52% year-on-year, to $4.4 billion, and its operating margin plummeted from 36% to 20%. The company on Wednesday announced a series of measures to cut costs as it reported its second consecutive quarter of falling revenue.

"We are making significant changes across the board to operate more efficiently," Wehner said. The company had "increased scrutiny" on all areas of operating expenses, he said, including reducing its office footprint.

Reality Labs, the Meta division that houses its metaverse and virtual-reality businesses, reported third-quarter revenue of $285 million – a drop of almost half compared with the same period in 2021. Wehner attributed this to lower sales of its Quest 2 VR headset.

Reality Labs made an operating loss of $10.2 billion in 2021 and has reported $9.4 billion in operating losses so far this year.

Nonetheless, the division's expenses will "increase meaningfully" in 2023, Zuckerberg said in Wednesday's earnings call, with the "biggest drivers" being the launch of a new Quest headset and the first full-year salaries of staff hired this year.

"We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year," Wehner said. "Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run."

Zuckerberg said Wednesday he's "pretty confident" the company is heading "in a good direction."

Meta has been under pressure from Wall Street to reduce spending, especially on its metaverse projects. On Tuesday, the CEO of Altimeter Capital, which owns hundreds of millions of dollars' worth of Meta shares, urged the social-media company to cut back on its metaverse investments and reduce its headcount by at least 20%, saying it had "lost the confidence of investors."