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Microsoft Shares Drop as Cloud Outlook Disappoints, Meta Gains on AI Optimism

Microsoft saw its shares tumble 6% on Thursday after its artificial intelligence (AI) investments failed to significantly boost cloud revenue. Meanwhile, Meta’s stock rose 4% as CEO Mark Zuckerberg reassured investors of strong growth potential, calling 2024 a “really big year.”

Both tech giants defended their heavy AI spending following concerns sparked by Chinese AI startup DeepSeek’s recent advancements in low-cost AI models. However, while Meta continues to show strong ad revenue growth—justifying its AI investments, according to Evercore analyst Mark Mahaney—Microsoft’s Azure cloud platform has struggled.

Microsoft missed market estimates for Azure’s quarterly revenue growth and provided a third-quarter forecast below expectations. The company had previously promised a second-half rebound, but analysts now express skepticism.

“The second-half re-acceleration story for Azure is not playing out,” said Barclays analyst Raimo Lenschow, adding that Microsoft prioritized AI workloads over core Azure functions, delaying the expected growth recovery.

For Meta, a stronger-than-expected 21% revenue increase eased investor concerns about Zuckerberg’s aggressive AI spending plans, which could reach $65 billion this year. Analysts remain bullish, with Barton Crockett of Rosenblatt stating that “Meta might have more benefits to show from AI than anyone.”

At least 15 brokerages raised their price targets on Meta, which saw a 65% stock gain in 2023, the largest among Big Tech firms. The stock’s rally was set to add over $80 billion to its market value.

Conversely, Microsoft was on track to lose about $182 billion in market capitalization. J.P. Morgan analyst Mark Murphy noted that Microsoft “did not recommit to its Azure second-half outlook the same way it did 90 days ago,” weakening confidence in the company’s cloud growth trajectory.

 

Meta Plans to Trim Workforce by 5%, Focusing on Underperformers

Meta to Cut 5% of Workforce in Performance-Based Terminations

Meta Platforms Inc. is set to reduce its workforce by approximately 5% through performance-based terminations, as outlined in an internal memo circulated to employees. With a total workforce of around 72,000 as of September, this decision could impact roughly 3,600 employees. CEO Mark Zuckerberg stated in the memo, reviewed by Bloomberg News, that the company aims to raise its performance standards and expedite the removal of underperforming staff.

Shifting Approach to Performance Management

Zuckerberg highlighted a shift in Meta’s approach to managing employee performance. “We typically manage out people who aren’t meeting expectations over the course of a year,” he explained. However, the company is now adopting a more accelerated process for performance-based cuts during this evaluation cycle. This decision reflects Meta’s broader strategy of streamlining operations while maintaining a focus on high-performance standards.

Impact on Meta’s Workforce

The company has indicated plans to replace the roles of terminated employees with new hires later in the year. This approach suggests that Meta is focusing on realigning its workforce to better suit the company’s evolving priorities. According to an insider familiar with Meta’s internal procedures, the current performance cycle is set to conclude in February, signaling that the staff reductions could take effect shortly afterward.

Broader Implications for Meta’s Strategy

This move comes as Meta continues to navigate a challenging economic landscape while investing heavily in emerging technologies such as the metaverse and artificial intelligence. By focusing on performance-based terminations and targeted hiring, Meta aims to optimize its workforce for growth in key areas. The decision also underscores the ongoing pressure on tech companies to balance innovation with operational efficiency amid fluctuating market conditions.

Meta Said to Be Testing X-Inspired Community Notes Feature on Threads

Meta is reportedly testing a new feature for Threads that draws inspiration from X (formerly Twitter), aiming to introduce a community notes system to improve content accuracy and foster diverse opinions. Announced by Meta CEO Mark Zuckerberg, this feature will be rolled out across the company’s platforms, including Facebook, Instagram, and Threads, as a replacement for traditional fact-checking teams. The community notes functionality is expected to allow users to engage directly with content that appears misleading or lacks context, offering their perspectives to provide clarity and additional information.

This new feature could be particularly significant as it empowers the community to take an active role in moderating content. According to a support article image shared by the company, the community notes system will allow users to write notes on posts they believe to be inaccurate or confusing. These notes can include explanations, background information, or insights from different perspectives. Once submitted, notes will be rated by other users, and if deemed helpful, they could be published to offer a more balanced view of the content in question. This system is part of Meta’s ongoing efforts to address misinformation while fostering open dialogue on its platforms.

Threads, which has recently introduced several new features to enhance user engagement, also rolled out an option to share photos and videos from other users without the need to quote the original post. Additionally, the app has been testing a scheduled post feature, allowing users to plan their content ahead of time. These updates show Meta’s commitment to improving the functionality of Threads and keeping it competitive with other platforms in the ever-evolving social media landscape.

In a video message shared last week, Zuckerberg highlighted the importance of free expression, especially in light of the upcoming 2024 US Presidential election. He mentioned that there had been “too many mistakes and too much censorship” in the past, emphasizing the need to return to the core principle of prioritizing speech. As Meta moves forward with its new community-driven content moderation approach, it aims to strike a balance between enabling free expression and ensuring that users have access to accurate and reliable information.

Meta is reportedly testing a new feature for Threads that draws inspiration from X (formerly Twitter), aiming to introduce a community notes system to improve content accuracy and foster diverse opinions. Announced by Meta CEO Mark Zuckerberg, this feature will be rolled out across the company’s platforms, including Facebook, Instagram, and Threads, as a replacement for traditional fact-checking teams. The community notes functionality is expected to allow users to engage directly with content that appears misleading or lacks context, offering their perspectives to provide clarity and additional information.

This new feature could be particularly significant as it empowers the community to take an active role in moderating content. According to a support article image shared by the company, the community notes system will allow users to write notes on posts they believe to be inaccurate or confusing. These notes can include explanations, background information, or insights from different perspectives. Once submitted, notes will be rated by other users, and if deemed helpful, they could be published to offer a more balanced view of the content in question. This system is part of Meta’s ongoing efforts to address misinformation while fostering open dialogue on its platforms.

Threads, which has recently introduced several new features to enhance user engagement, also rolled out an option to share photos and videos from other users without the need to quote the original post. Additionally, the app has been testing a scheduled post feature, allowing users to plan their content ahead of time. These updates show Meta’s commitment to improving the functionality of Threads and keeping it competitive with other platforms in the ever-evolving social media landscape.

In a video message shared last week, Zuckerberg highlighted the importance of free expression, especially in light of the upcoming 2024 US Presidential election. He mentioned that there had been “too many mistakes and too much censorship” in the past, emphasizing the need to return to the core principle of prioritizing speech. As Meta moves forward with its new community-driven content moderation approach, it aims to strike a balance between enabling free expression and ensuring that users have access to accurate and reliable information.