Meta shares rise despite layoffs as AI expansion and cloud computing plans raise concerns about long-term margins
Meta is making a huge shift toward artificial intelligence (AI), even though it will eliminate thousands of jobs. The company is investing heavily in AI infrastructure while restructuring its workforce. Meta CEO Mark Zuckerberg said artificial intelligence does not automatically mean people will lose their jobs. Speaking about Complex’s idea generation, Zuckerberg said AI should help workers become more productive, not replace them, adding that higher productivity could create more jobs in the future.
His comments came just days after Meta made one of its largest layoffs. The company recently cut about 8,000 jobs, or about 10% of its workforce, as part of a major restructuring, Firstpost reported. this layoffs Multiple departments were affected, including integrity, cybersecurity and content design teams.
Meta reinvents the artificial intelligence workforce
American employees who lost job Severance packages were awarded, and Meta is moving about 7,000 employees into artificial intelligence-related positions. The company also eliminated approximately 6,000 vacant positions as part of the restructuring.
During Meta’s recent earnings call, Zuckerberg said that artificial intelligence can accomplish many tasks that previously required larger teams. Because of this, the company believes some divisions no longer need to be as large. Meta plans capital expenditures of $125 billion to $145 billion this year. That’s nearly double last year’s spending. Most of the funds will be used to build artificial intelligence data centers, purchase specialized artificial intelligence chips, and train advanced artificial intelligence models within Meta Superintelligence Labs.
CNBC reports that Meta will sell unused computing power to businesses. Bloomberg also reports that the company is deciding whether to sell rights to its AI models or simply rent out raw computing power. Wall Street welcomed the news.
Also read: Why FEMA is laying off thousands of workers and why a federal judge refuses to block it
Cloud plans drive Meta stock higher
Meta’s shares jumped 9% in one day, their biggest gain in more than five months, as investors liked the idea of ​​new revenue beyond advertising. Investors have been asking Meta to find ways to make money from the hundreds of billions of dollars it spends on artificial intelligence infrastructure and data centers.
In April, Meta increased the cap on its 2026 capital spending plan by another $10 billion, bringing the total to $145 billion. To help pay for these massive investments, Meta also raised $25 billion in bond offerings. About 98% of the company’s revenue still comes from digital advertising. So far, most of Meta’s AI investments have primarily improved its advertising business.
Why Wall Street is worried
But Wall Street also sees downsides to Meta’s move into the cloud business. Selling cloud services often requires large enterprise sales teams and customer support operations, which are expensive. That means Meta’s profit margins are likely to decline.
The cloud business typically has much lower profit margins than Meta’s advertising business. Meta currently has one of the highest profit margins in the tech industry. According to CNBC, its latest gross profit margin was 82% and operating profit margin was 41%.
Google Display Risk
Google’s business It illustrates why investors are cautious. Google’s advertising business has operating margins of about 42%, while its cloud business’s margins are only about 18%.
Paul Meeks said Meta already has one of the strongest business models in technology thanks to advertising. He warned that the shift to cloud computing could reduce the company’s overall profit margins. Meeks believes Meta will earn better returns by leveraging AI to improve its own products and services rather than entering the highly competitive cloud infrastructure business.
Overall, Meta is trying to balance three goals at once: cutting costs through layoffs, spending billions to become a leader in artificial intelligence, and finding new ways to make money beyond advertising. Investors are reportedly excited about new revenue opportunities but are also bracing for lower profit margins as Meta becomes a major cloud computing provider.
