Kamal Ghorui
Mark Zuckerberg may not have the best AI models in the game right now—but he might be winning the AI race in a way nobody expected. That’s the view of Bernstein analyst Mark Shmulik, who said this week that Meta’s reported plans to cut up to 20% of its workforce could actually be a sign the company is pulling ahead, not falling behind.The note comes after Reuters first reported on Friday that Meta is preparing sweeping layoffs—potentially affecting more than 15,800 of its roughly 79,000 employees—as the company looks to offset the staggering cost of its AI bets and build a leaner, AI-first organisation. No date has been set and the final scale hasn’t been locked in. Meta, for its part, called it “speculative reporting about theoretical approaches.”
Meta’s AI layoffs could be a feature, not a bug
Shmulik’s argument is that the potential cuts aren’t a distress signal—they’re proof that Meta’s AI transformation is actually working. Companies can win the AI race by building frontier models, sure. But they can also win by deploying AI so deeply across their operations that their competitive advantage becomes impossible to close. Shmulik believes Meta is doing exactly that.“Meta has already demonstrated the compelling returns they’re seeing from deploying AI to core workloads,” he wrote. If the company can now redesign its operations from the ground up to be AI-forward, the cost and performance advantage it builds “could be insurmountable,” he added.By at least one measure, the strategy is working. Meta’s revenue per employee has climbed steadily over the past three years and surpassed Amazon‘s last year, according to data cited in the Bernstein note. Only Pinterest ranked higher.
Zuckerberg has been building toward this moment
Zuckerberg has been telegraphing this shift for a while. On Meta’s January earnings call, he told investors the company is “elevating individual contributors and flattening teams,” and said he’s already seeing “projects that used to require big teams now be accomplished by a single, very talented person.” Last week, Meta created a new AI engineering organisation where teams will run manager-to-employee ratios of up to 1:50.The scale of Meta’s AI spending makes the efficiency push almost inevitable. The company has committed $600 billion to build out data centres by 2028, and is projecting capital expenditure of up to $135 billion in 2026 alone—nearly double last year’s figure. It has also been handing out pay packages worth hundreds of millions of dollars over four years to lure top AI researchers to its superintelligence team.Business Insider confirmed the layoff planning, with sources saying some managers have already been asked to draw up cost-cutting plans. Cuts could come as soon as a month, one person told BI.
A 20% cut at Meta could set off a cascade across Silicon Valley
If Meta pulls it off—restructuring itself into a genuinely AI-first company—Shmulik warns rivals will have no choice but to follow. “If one major player is able to redraw the blueprint for an AI-enabled organization, others will rush to replicate it,” he wrote, flagging a potential “wave of panic” triggering “a cascade of hurried pivots, half-formed strategies, and reactive restructuring across the ecosystem.“Meta wouldn’t be alone in reshaping its workforce around AI. Amazon has cut 30,000 corporate jobs over the past three months—the largest workforce reduction in its history—as CEO Andy Jassy pours roughly $125 billion into data centres and AI infrastructure. Atlassian laid off 10% of its staff, or about 1,600 employees, last week, with CEO Mike Cannon-Brookes acknowledging that AI “changes the mix of skills we need.” Block’s Jack Dorsey went furthest of all, axing 40% of his company and telling WIRED the move was about rebuilding the company as what he called “an intelligence”—adding that every organisation that isn’t doing the same faces something “existential.” Since November, AI-linked layoffs globally have crossed 61,000.Not everyone is convinced the AI rationale holds up. Salesforce CEO Marc Benioff pushed back on the narrative, telling CNBC he simply doesn’t see the wave of mass white-collar job cuts that others are predicting. Mizuho analyst Dan Dolev was more direct about Block specifically, saying the vast majority of those cuts “were probably not due to AI.” OpenAI CEO Sam Altman said last month that some companies are blaming AI for job cuts they would have made anyway.Shmulik addressed the scepticism head-on. “Is AI a convenient scapegoat for cuts that might have happened anyway? Perhaps,” he wrote. “But we believe the market will quickly see through companies using AI as camouflage.” His read on Meta, specifically, is more generous—pointing to the success of its post-pandemic restructuring as evidence the company knows how to execute a genuine overhaul, not just dress one up.Meta’s shares rose nearly 3% as markets opened Monday, after Reuters reported the planned layoffs. Wall Street, at least, seems to think Zuckerberg is onto something.
