Meta's body-blow layoff announcement will see the parent of Facebook, Instagram and WhatsApp making its first-ever major layoffs as a company, cutting 11,000 employees, 13% of its total; predictably investors are responding favorably, bumping the stock up by over 5% in pre-market trading. While the dust settles and we start to get an idea of how specific departments, products and regions are being impacted, Meta has also released some updated financials for 2023 that detail billions shaved off of its expenses estimates on the back of reduced hiring and less capex spending in areas like metaverse.
In an 8-K filing today, the company confirmed that reduced hiring next year will shave between $1 billion and $2 billion off its 2023 total expenses range. Overall expenses for 2023 are now estimated at between $94 billion and $100 billion, versus its previous range of $96 billion to $101 billion.
"The updated range reflects our plan to add fewer employees in 2023 than we previously expected as we are significantly slowing our hiring trajectory through the beginning of 2023," Meta said, expanding on words from CEO Mark Zuckerberg in his open letter, which referred to a "hiring freeze" in Q1.
(The expenses figure includes $2 billion in charges due to reduced office facilities, which Meta had previously disclosed.)
Meta also noted in the 8-K that it is narrowing capital expenditures for 2023 by $2 billion at the top end. Capex estimates are now between $34 billion and $37 billion, versus $34 billion and $39 billion previously. Meta doesn't detail here which areas will be hit by those cuts -- capex can include any number of things such as data centers and network infrastructure and AI, but not strictly Meta's costly "metaverse" effort (which may have server and AI investments but is mostly an R&D investment, as Ben Thompson notes). It does note that the latter of these is not looking very bright.
"We continue to anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year," Meta said. Again, it doesn't specify numbers, but Reality Labs (the division that houses the metaverse operation) accounted for $285 million in revenues in Q3, just 1% of the company's total for that period.
The company's continuing ambition to grow metaverse and other new lines of business have been a big pull on Facebook's balance sheet.
For context, in 2020, the company sunk $15.72 billion into capex, a figure that ticked up in 2021 to $19.24 billion. In 2022, capex looks to be even more outsized against a stark backdrop of sluggish revenue due to declining returns on its core advertising business: Meta estimated in Q3 that 2022 capex would be in the range of $32 billion and $33 billion. In that context, its capex estimates for 2023 of $34 billion-$37 billion is still higher than this year, and more than double what it spent two years ago -- numbers that might not be in line with what investors likely hope to see. In other words, mixed reality is not syncing with Meta's financial reality.
"In this new environment, we need to become more capital efficient," Zuckerberg wrote in his note today. "We’ve shifted more of our resources onto a smaller number of high priority growth areas — like our AI discovery engine, our ads and business platforms, and our long-term vision for the metaverse. We’ve cut costs across our business, including scaling back budgets, reducing perks, and shrinking our real estate footprint. We’re restructuring teams to increase our efficiency."
Revenue ranges previously provided by Meta for Q4 revenue -- between $30 billion and $32.5 billion -- are unchanged, it said in the 8-K filing today, as are the ranges it provided for overall expenses in 2022, which are between between $85 billion and $87 billion.