Meta falls 3.8% on reports of 20% workforce cuts to fund AI spending
Company dismisses 'speculative' layoff rumors as analysts split on $600B artificial intelligence investment strategy
Meta Platforms shares fell 3.8% on Friday, closing at $613.71, as reports circulated that the social media giant is considering workforce reductions affecting up to 20% of employees to fund its ambitious artificial intelligence infrastructure buildout. The stock traded as low as $609.55 during the session, with volume reaching 18.8 million shares, 24% above its daily average.
The speculative reports, citing unnamed sources, suggested that Meta could eliminate approximately 16,000 positions from its workforce of nearly 79,000 employees. The purported reductions would be aimed at offsetting rising costs associated with the company's massive AI investment plans, which include projected capital expenditures of $115 billion to $135 billion in 2026 alone, up from $72 billion in 2025.
Meta spokesperson Andy Stone dismissed the reports as "speculative reporting about theoretical approaches." The company had previously denied similar layoff rumors in February, clarifying that recent personnel changes were "individual cases not related to any company wide initiatives."
The sell-off compounds existing investor concerns about Meta's aggressive AI spending. The company is projected to invest at least $600 billion in AI technology and infrastructure across the United States through 2028. This substantial capital commitment comes as Meta faces competitive pressure in the AI race—its delayed "Avocado" AI model, originally slated for a March release, has been postponed until at least May due to performance concerns in internal testing against rival systems.
Mark Zuckerberg has indicated that AI would drive efficiency gains within the company. In January, the chief executive said that "projects that used to require big teams now be accomplished by a single very talented person," adding that 2026 would be the year "AI starts to dramatically change the way that we work."
Despite the current pullback, analysts remain largely bullish on Meta's long-term prospects. The stock maintains a consensus "Moderate Buy" rating with an average price target of $844.44, representing roughly 38% upside from Friday's close, according to MarketBeat data. Recent analyst actions have been predominantly positive, with Morgan Stanley raising its target to $825, Bernstein increasing its objective to $900, and Bank of America lifting its target to $885.
The company's strong fundamentals provide some support against the negative sentiment. Meta reported robust fourth-quarter earnings in late January, delivering $8.88 per share against expectations of $8.16, with revenue climbing 23.8% year-over-year to $59.89 billion. The company posted a net margin of 30.08% and return on equity of 38.61%.
Meta's substantial AI infrastructure investment represents one of the largest capital allocation bets in corporate history. The spending is primarily directed toward data centers, servers, and networking equipment necessary for training and deploying advanced AI models. This strategy mirrors broader industry trends where technology companies are pouring tens of billions into AI capabilities, though few are committing to expenditures of this magnitude relative to their market capitalization.
Technical indicators suggest the stock is approaching oversold territory. Meta's relative strength index (RSI) stands at 27.3, a level that historically has preceded short-term rebounds. The shares are now trading below both their 50-day moving average of $653.98 and 200-day moving average of $678.88, having declined more than 22% from their 52-week high of $795.06 reached earlier this year.
The divergent analyst views on Meta's AI strategy reflect broader market uncertainty about whether massive AI infrastructure spending will generate commensurate returns. While some analysts argue that Meta's scale and existing user base provide it with unique advantages in monetizing AI technologies, others caution that the capital intensity of the AI race could pressure margins without guaranteed revenue growth.
Investors will be watching closely for any signals about the company's workforce strategy when Meta reports next quarter's results. The dividend payable on March 26th to shareholders of record as of March 16th may provide some support for the stock, with the current annualized dividend of $2.10 offering a modest 0.3% yield.