00:00What do we need to know, the size and scope, and then the rationale to cut back on headcount?
00:04Well, let's start with the rationale because this year Meta is going to spend as much as
00:09135 billion in capital expenditures. That's a wow. That's a wow. And this is before earnings. Next
00:14week, we could see that push even higher. So there's a lot of money being spent on AI,
00:17and they are citing efficiency and investment as a reason for cutting costs with personnel.
00:25That's 8,000 potential employees facing layoffs and 6,000 open roles. And Brody,
00:32the question I want to ask you is Evercore ISI had put out an analyst note saying they
00:36estimate that's about 3 billion in savings for Meta. Are these layoffs at Meta, the buyouts at
00:43Microsoft, are they really going to push the needle amid AI spend? I think that they're probably just
00:49going to keep margins kind of flat, right? I think that's really the goal. I mean, Microsoft didn't
00:54stated in their buyout letter. But as you said, data centers cost a whole lot of money. And then
01:02the kind of traditional way to offset that spending has been cost cuts everywhere else. And, you know,
01:08one of the most obvious places companies have been going is their workforce.
01:13Right. Brody, with Microsoft, this is voluntary. It's what we would call voluntary redundancy over
01:21in Europe or the UK, a buyout here. Is that what Microsoft typically does? Or why are they going
01:26that route this time? They've never done that before. I mean, they've done their share of big
01:31layoffs, right? So they're certainly not afraid to do that. But I think Microsoft often, you know,
01:37it tries to be seen as a bit maybe more of a compassionate big tech company. You see that
01:42in the way they communicate their environmental goals, for example. But I think it's all part of
01:47the same trend, right? That companies are feeling like in this moment that their employees should
01:54be able to do more with less. I don't think that it's straight up, hey, AI is replacing people quite
02:00yet. But I do think companies are saying, well, I think we could probably get by with fewer folks
02:07these days. With Meta, the story around which parts of the company get trims has been more
02:15important, right? Reality labs, refocus on AI, cut back on the metaverse. When I was reading the
02:22reporting, I was trying to understand like where specifically in this very big company are these
02:27cuts taking place. Yeah, that's a billion dollar question, Ed. I am looking to see that too next
02:33week. Right. If you are a Meta employee and you're part of these cuts and you're hearing this,
02:37please reach out to Riley and try and explain it to us. I mean, it's a high anxiety moment at
02:41Meta,
02:41and we are hearing from a number of employees who are really anxious in this time. Reality labs has
02:46already faced cuts. That's been separate from the 10 percent that is coming in May. And there are
02:52questions as to whether or not this is just the beginning of broader cuts throughout the year.
02:57With something like 10 percent, you've got to believe that this is pretty widespread. But we
03:02know that they continue to invest in Meta superintelligence labs, that unit that is driving
03:07forward the new models under Alexander Wang. I'd be reluctant to say we're going to see major cuts
03:13there. Okay, team, the way that we're thinking about this is just two companies, and we're trying
03:18to compare the level of cuts to capital expenditures. But Brody, like earlier in the year, software names
03:24were pretty impacted, right? You've been coming on the show periodically with a very large range of
03:29companies. I'm thinking Oracle as an example. Is there a sort of broader theme here industry-wide
03:36of cutback, people cutting back, and the rationale for doing so?
03:40Yeah, absolutely. I think, I mean, we saw big layoffs across tech starting around early 2023,
03:46but this more recent wave in the last, call it year, year and a half, I think is more tied
03:52to
03:53that GPU build out. I mean, the margin profile of these companies has really changed. You went from
03:58selling software packages, which were among the highest margin product, you know, humankind has
04:04ever made, to selling GPU infrastructure that's notably less so. And so they've really had to offset
04:10this one way or another. You know, as you mentioned, Oracle last month laid off thousands of people,
04:17and largely it really hit those cash cow businesses. They felt, hey, let's milk these for margins while
04:23we build out our big data centers for open AI. Brody, a question for you that I have is,
04:30we've talked a lot about entry-level jobs and how they're going away. Now we're thinking about bigger
04:37picture, higher, higher up jobs. What is it going to mean for layoffs for more senior executives
04:43across tech companies? Where could they possibly go? Just quick, Brody, we've got to get gone.
04:48It's got a tough market. You know what? I hear every single day that it's taking a long time to
04:52find
04:52jobs. So it's, yeah, it is a tough time in the tech industry.
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