The CEO of social media giant Meta was cautiously optimistic during the first quarter results.
The atmosphere is beginning to resemble that currently found in many companies in America where the consequences of a looming recession are feared.
For months now, many economists have been anticipating a sharp downturn in the economy due to aggressive monetary policy by the Federal Reserve and central banks around the world to combat record price increases everywhere. The Russian war in Ukraine has further exacerbated the supply chain problems caused by the Covid-19 pandemic.
This cocktail, experts say, will affect consumption. Households should, these experts explain, reduce their expenses for fear of a disappointing tomorrow and focus only on essential expenses.
Mark Zuckerberg, CEO of Meta, now seems to share this pessimistic view. During the traditional weekly Q&A session with company employees on June 30, he said he expected “one of the worst downturns that we’ve seen in recent history,” according to an audio recording obtained by Reuters.
Consequently, Meta will accentuate its cost reduction policy. The firm only plans to hire between 6,000 and 7,000 new engineers in 2022, against an initial project of 10,000 new recruits, indicates Reuters. It is therefore a revision of 30% to 40%.
In May, a source told TheStreet that the social media giant was planning to halt or in some cases slow hiring for most mid-to-senior level positions. The goal was to revise priorities and align hiring targets with current market estimates and pacing, the source said.
“We regularly re-evaluate our talent pipeline according to our business needs and in light of the expense guidance given for this earnings period, we are slowing its growth accordingly,” a Meta spokesperson told TheStreet in an emailed statement. “However, we will continue to grow our workforce to ensure we focus on long-term impact.”
At the time, this decision came just weeks after another cost-saving measure: the pause on hiring early-career engineers.
Russia Is a Problem for Sales
The company posted first-quarter revenues of $27.908 billion, up 6.6% year over year, nearly all of it coming from the new ‘Family of Apps’ division the company created last year, missing analysts estimates of a $28.2 billion tally. Ad revenues were up 6.1% to $27 billion.
But after suffering its first-ever decline in daily active users last quarter, Meta said the figures rose 4% from last year at 1.96 billion, just ahead of the Street consensus of 1.951 million, suggesting the social media group has been able to offset the market share gains of China-based TikTok with both its Facebook and Instagram apps.
The company had, however, warned that the Russian war in Ukraine would weigh on its sales. Facebook was banned in Russia after the firm publicly voiced its opposition to Russian intervention by taking strong action to limit Kremlin propaganda on its platforms.
Meta had 77,805 employees as of March 31, up 28.3% from March 31, 2021 when the company had 60,654 employees, according to a filing with the U.S. Securities and Exchange Commission (SEC).
Meta did not immediately respond to a request for comment.
Meta isn’t the only tech giant looking to cut costs.
Electric vehicle maker Tesla (TSLA) – Get Tesla Inc. Report said in June that it would cut its workforce by around 3% in the coming months. Software giant Microsoft (MSFT) – Get Microsoft Corporation Report has also lowered the hiring targets it had initially set, while the e-commerce giant Amazon (AMZN) – Get Amazon.com Inc. Report is expected to reduce its initial hiring targets in the retail business, according to a leaked memo in May.