Scale AI Cuts 14% of Workforce Amid Industry Shifts Following Meta's $14.3 Billion Investment

Scale AI lays off 14% of staff, largely in data labeling business | TechCrunch

Data labelling startup Scale AI is laying off 200 employees, roughly 14% of its staff, and cutting ties with 500 of its global contractors, Bloomberg reported on Wednesday. The cuts come just a month after Meta hired Scale AI's CEO in a $14.3 billion deal. In a memo obtained by Bloomberg, interim CEO Jason Droege told staff that Scale AI had too quickly scaled its core data labeling business -- in which the startup supplied AI labs with labeled, structured data to train AI models. Droege said in the memo that Scale AI would staff up around its enterprise and government sales units. Like other AI startups that have been reverse acquihired, such as Inflection, it seems that Scale AI now has to pivot from the business that put it on the map. In light of Meta's investment, several of Scale AI's largest data customers cut ties with the startup.

Scale AI lays off 200 employees, 'We ramped up our GenAI capacity too quickly'

Scale AI is an AI data labeling company. It uses human workers -- often sourced from outside the US -- to annotate the data used by companies like Google, OpenAI, and Anthropic to train their AI models. The news comes amid a major shake-up in the AI industry as mergers and acquisitions, quasi acqui-hires, and defections from one startup to another run rampant. On July 11th, The Verge was first to report that OpenAI's deal with Windsurf was off and that Google would be hiring Windsurf CEO Varun Mohan, cofounder Douglas Chen, and some of Windsurf's R&D employees. Last month, Meta paid $14.3 billion for a 49 percent stake in Scale AI and also launched a superintelligence lab helmed by the company's former CEO, Alexandr Wang. Meta has since started to build out the lab with high-level staff from its rivals.

Scale AI lays off 200 employees, one month after Meta's $14 billion investment -- says it scaled up too quickly

The data annotation company is also firing 500 global contractors in a move that is designed to streamline its data business. In an industry famed for moving fast and breaking things, it's odd to hear of anyone slowing down. But just a few weeks on from Meta investing $14.3 billion in data annotation firm, Scale AI, it's laying off over 200 staff and 500 of its global contractors, The Verge reports. Although this may amount to classic efficiency savings when two large firms merge their efforts, the CEO claims that it's because "we ramped up our GenAI capacity too quickly over the past year." Meta announced its pivot towards developing "superintelligence" AI at the start of June, alongside talk of enormous signing bonuses to attract OpenAI employees, and news of a $14 billion investment in Scale AI. That gave Meta a 49% stake in the business, and the attention and time of its then CEO, Alexander Wang, who has since joined Meta. But even with all that investment, Scale AI is looking to cut back on a sizeable number of its employees. As of the start of July, Scale AI, according to the company's own website, employed 900 people, so cutting 200 staff represents a major reduction in its workforce. This is coming as part of a major restructuring of its business, with Scale AI claiming that it will make new hires and investments with a focus on public sector and international public sector markets. "The reasons for these changes are straightforward: we ramped up our GenAI capacity too quickly over the past year," Droege said. "While that felt like the right decision at the time, it's clear this approach created inefficiencies and redundancies. We created too many layers, excessive bureaucracy, and unhelpful confusion about the team's mission. Shifts in market demand also required us to re-examine our plans and refine our approach." This comes at a time of increasing competition among the major tech firms as they jostle for the top AI talent. Meta has made a number of staffing acquisitions from other companies, and Google managed to swipe a deal with Windsurf right out from under OpenAI's nose, with the CEO now joining Google instead. Although being let go during a time of consolidation may not be the best thing to put on a CV, experienced AI workers are in serious demand, and the major tech firms are paying big money to secure the top talent, so there is hope for those let go. It's also perhaps the first suggestion that even the AI industry isn't immune to layoffs. As many other major tech firms downsize because of claimed AI gains in efficiencies, Meta, Google, OpenAI, and others have been focusing mostly on hiring new talent. But perhaps old talent has as few guarantees as it does in less AI-centric businesses. Arguably more intriguing from an AI-industry perspective is that Scale AI is severing ties with so many of its international contractors. Scale AI's business is built around having thousands of workers hand-label AI data to improve responses and image recognition. As Time reports, scaling back these efforts could be part of reducing Scale AI's involvement with rival AI firms, like OpenAI, to which the firm currently supplies data. Regardless, this is the future of Scale, with Meta's thumb firmly on them. "We're streamlining our data business to help us move faster and deliver even better data solutions to our GenAI customers," Droege said.

Scale AI cuts 14% of workforce after Meta investment, hiring of founder Wang

Scale AI's interim CEO Jason Droege, who took over for Wang, told employees in a memo on Wednesday that the startup ramped up its generative AI capacity "too quickly" and created too many layers of "excessive bureaucracy." He said Scale AI remains a well-resourced and well-funded company. "These changes will make us more nimble -- enabling us to react more quickly to shifts in the market and customer needs," Droege wrote in the memo, which was viewed by CNBC. "This structure will allow us to better serve the customers we have today and win back customers that have slowed down work with us." Droege said Scale AI will "significantly increase headcount" across its application business units in the second half of the year, including within its enterprise, public sector and international public sector divisions. Bloomberg was first to report on the number of job cuts, which Scale AI confirmed to CNBC. Scale AI, founded in 2016, is best known for helping major tech companies like OpenAI, Google and Microsoft prepare data they use to train cutting-edge AI models. OpenAI has been winding down its work with Scale AI over the past year, and Google is also reportedly cutting ties with Scale AI following the company's deal with Meta, according to a report from Reuters. Prior to the layoffs, Scale AI had a 1,400-person global workforce. Spokesperson Joe Osborne said affected employees have been provided severance. The company is also ending work with 500 contractors out of thousands worldwide, he said. "We're streamlining our data business to help us move faster and deliver even better data solutions to our GenAI customers," Osborne told CNBC in a statement. "We also plan to make significant investments and hiring across our enterprise and government AI businesses." Meta has been on a multibillion-dollar AI hiring spree in an effort to better compete with rivals like OpenAI. Meta CEO Mark Zuckerberg selected Wang to serve as the company's chief AI officer, overseeing its new organization called Meta Superintelligence Labs. A small number of Scale AI employees also joined the company. Droege wrote in the memo on Wednesday that, for the employees who are being laid off, "I want to extend our deepest gratitude for their valuable contributions and dedication to our company."

Scale AI cuts 200 employees on the heels of Meta investment

Scale AI is laying off 14 percent of its workforce. Credit: Thomas Fuller / SOPA Images / LightRocket / Getty Images AI data-labeling company Scale AI is laying off 200 employees, following a dramatic month with Meta. Scale AI is cutting 14 percent of its workforce, and will also end work with 500 global contractors, Bloomberg reported. This comes after Scale AI received $14.3 billion of investment from Meta and simultaneously lost its CEO Alexandr Wang to Meta's superintelligence group as part of the deal. According to an internal memo from Scale AI's interim CEO Jason Droege viewed by Bloomberg, the layoffs are due to its data labeling business scaling too quickly, which led to bureaucracy and "unhelpful confusion about the team's mission." The memo also cited "shifts in market demand." Meta's poaching of top AI talent to gain a competitive edge over its rivals has had a strong orbital effect over the AI industry, including pulling Scale AI under its influence. Meta's investment in Scale AI gives it a 49 percent stake in the company, which has reportedly caused OpenAI and Google cut ties with the data-labeling company due to competing interests. Scale AI is known for labeling and annotating training data, which is a crucial part of developing AI models. Scale AI and OpenAI previously had a longstanding relationship, which goes back to when Wang and OpenAI CEO Sam Altman were roommates during the height of the COVID-19 pandemic. Mark Zuckerberg was reportedly disappointed with Meta's Llama models, which prompted him to personally recruit top AI leaders and researchers for an ambitious project to develop AI superintelligence. Employees from OpenAI, Anthropic, Google, and Apple have left to join Meta's new team, shaking up the entire industry. A Scale AI spokesperson told Bloomberg that the company's layoffs are part of a restructuring to focus on enterprise and government contracts. The company plans to hire hundreds of people later this year for these efforts.

Scale AI cuts 14pc of staff, 500 contractors after Meta deal

Scale AI is to cut 14pc of its workforce and stop work with 500 contractors, following Meta's $14.3bn investment in June, after rumours of poor work practices abounded. At first glance, the news of Scale AI cutting 500 contractors and around 200 staff after a $14.3bn investment from Meta might look like another rationalisation headline, but anyone following the rumours that have swirled around work practices at the nine-year-old startup which provides specialised data to train AI and evaluates models and applications, will be unsurprised by the so-called restructuring. "After reviewing our company and its operations, I've made the decision to restructure several parts of the GenAI organisation," interim CEO Jason Droege said in a memo to staff yesterday seen by Business Insider. "I believe these changes will best position us for the long-term, make the org more efficient, and allow GenAI to focus on the biggest and most profitable opportunities. As a result of this restructuring, some members of this org will be leaving Scale today." An exclusive by Inc. in June had unearthed shoddy practices and claims that many independent contractors were basically 'spammers' feeding poor, inaccurate data into its AI used for its biggest client Google. While Scale AI spokesperson Joe Osborne said at the time that "this story is filled with so many inaccuracies", the rumours continued to swirl about poor work and data quality monitoring inside that AI start-up. Scale AI of course lost Google as a customer, after Meta became 49pc owner, but Inc. claimed that there had been "lapses in security protocols" and "spam" problems in the work done for the search giant for nearly a year. There appeared to have been a particular issue with remote contractors. The huge investment by Meta - part of a drive to up its game in AI - valued Scale at more than $29bn, making it Meta's second-largest, following the more than $20bn acquisition of WhatsApp back in 2014. It has led many commentators to speculate it may have overpaid, in the rush to compete in the AI race. Don't miss out on the knowledge you need to succeed. Sign up for the Daily Brief, Silicon Republic's digest of need-to-know sci-tech news.

Scale AI Layoffs 200 Employees a Month After Meta Acquisition | AIM

The layoffs affect the company's data-labelling division and are part of a strategy to streamline operations amid shifting market demands and an overexpansion in the past year. Scale AI is reducing its workforce by hundreds in its data-labelling division, just a month after Meta invested $14.3 billion in the company and hired its CEO. According to Bloomberg, the firm has laid off 200 full-time employees, representing approximately 14% of its total global staff. It plans to discontinue work with 500 of its numerous global contractors, as stated by Scale spokesperson Joe Osborne on Wednesday. This initiative aims to "streamline our data business to help us move faster," Osborne explained, noting that Scale intends to bolster teams in other areas, such as enterprise and government sales. In a memo sent to employees on Wednesday, interim CEO Jason Droege indicated that the layoffs stemmed from an overexpansion of the data labelling division throughout the past year, resulting in "too many layers, excessive bureaucracy, and unhelpful confusion about the team's mission." Droege also stated that "shifts in market demand" played a role in the decision to restructure. Following the partnership with Meta, several of Scale's key clients, including OpenAI and Alphabet's Google, have reduced their engagement with the startup, according to various reports. "We're streamlining our data business to help us move faster and deliver even better data solutions to our GenAI customers," Osborne told CNBC in a statement. "We also plan to make significant investments and hire across our enterprise and government AI businesses." Scale AI generated approximately $870 million in revenue in 2024 and is projected to reach $2 billion in revenue for this year, as reported by Bloomberg News in April. In June, Meta completed its multibillion-dollar investment in Scale AI, acquiring a 49% ownership stake in the company. As a result of this agreement, co-founder Alexandr Wang departed from the startup to head a new superintelligence division at Meta, which is part of the parent company's significant investment aimed at advancing its AI development.

Scale AI cuts 14% after Meta poaches CEO

Scale AI is implementing significant workforce reductions, affecting approximately 14% of its staff and numerous contractors, according to a recent report. This measure includes the termination of 200 employees and the cessation of engagements with 500 global contractors. These adjustments follow a significant leadership change last month, wherein Meta recruited Scale AI's CEO in a transaction valued at $14.3 billion. Interim CEO Jason Droege communicated in an internal memo, obtained by Bloomberg, that the company had expanded its core data-labeling operations too rapidly. This segment of the business focused on providing artificial intelligence laboratories with labeled, structured data essential for training AI models. Droege stated that Scale AI intends to increase staffing within its enterprise and government sales divisions. This strategic shift occurs as several of Scale AI's major data clientele have reportedly concluded their partnerships with the startup, a development occurring in the wake of Meta's substantial investment. The company appears to be reorienting its operational focus from the initial business model that established its market presence.

$14 billion Meta deal, then massive layoffs? Scale AI cuts 200 roles, 14% of its workforce in stunning move

Scale AI has recently reduced its workforce. The company laid off 200 full-time employees. This decision follows a $14 billion deal with Meta. The restructuring impacts the Generative AI division. Key leaders have also left the company. Some clients, including Google, have paused projects. Scale AI plans to invest in other sectors. Just weeks after closing a $14 billion deal with Meta, Scale AI has abruptly laid off 200 full-time employees, which is 14% of its 1,400-person workforce, along with 500 contractors, as the company is 'restructuring' its GenAI group, sparking concerns about the startup's direction and stability, as per a report. The layoffs were announced through an email from interim CEO Jason Droege, as reported by Business Insider. The message informed staff that the company was restructuring its Generative AI division, an essential part of Scale that supports high-profile clients like Elon Musk's xAI (the maker of Grok) and Google's Gemini chatbot, according to the report. The sudden move left some employees locked out of their systems and removed from Slack channels before they even woke up, as per Business Insider. ALSO READ: Tomorrowland fire shock: Main stage engulfed in flames days before start of massive festival - what we know The email mentioned that, "As a result of this restructuring, some members of this org will be leaving Scale today," adding, "To ensure a smooth process and give people the necessary space, please do not come into the office," as quoted in the Business Insider report. According to a separate email to the affected employees obtained by Business Insider, the laid-off ScaleAI employees are expected to be paid as normal through September 15 and then receive a minimum of four weeks of additional pay if they sign the company's severance agreement, reported Business Insider. The workforce reduction comes after Meta's massive investment into Scale, a deal that included hiring the company's co-founder and former CEO, Alexandr Wang, to lead Meta's new Superintelligence division, according to the Business Insider report. Meta also took a significant equity stake in the startup, reportedly approaching half of the company, as per Business Insider. ALSO READ: Crisis-driven rally? Bitcoin and Gold soar as inflation looms and political heat rises In the weeks following that deal, several key leaders at Scale have departed, including multiple VPs, chiefs of staff, and top AI researchers, according to the report. At the same time, major clients like Google have reportedly paused projects, stoking speculation about the company's internal dynamics and long-term viability, as per the Business Insider report. The startup is also facing challenges around the security practices of its training documents, according to the report. However, the firm told Business Insider that Scale remains well-funded and is committed to growth and hiring hundreds more employees in different sectors, as per the report. Scale AI spokesperson Joe Osborne said, "We're streamlining our data business to help us move faster and deliver even better data solutions to our GenAI customers," and added that, "We also plan to make significant investments and hiring across our enterprise and government AI businesses," as quoted in the report. Business Insider has shared the full email from Scale AI's CEO Jason Droege to Scale AI's GenAI employees, below: Hi team, After reviewing our company and its operations, I've made the decision to restructure several parts of the GenAI organization. I believe these changes will best position us for the long-term, make the org more efficient, and allow GenAI to focus on the biggest and most profitable opportunities. As a result of this restructuring, some members of this org will be leaving Scale today. To ensure a smooth process and give people the necessary space, please do not come into the office. All impacted FTEs will receive an email to their personal email address by 8am PT and badge and IT access will be removed. For those not impacted, I will share more details later this morning on the restructuring and our path forward. I know news like this is tough, but please know how grateful I am for the work this team has done. Whether you're directly affected by these changes or not, every one of you has helped build Scale into the company it is today and the accomplishments it has made. Thank you again. Is Scale AI going out of business? No. The company says it's still well-funded and is shifting focus to more sustainable growth in other sectors like enterprise and government AI. What's happening with Scale's clients? Some major clients, like Google, have reportedly paused projects with Scale since the Meta deal. This has sparked questions about long-term relationships.

Scale AI Layoffs Hit 14 Percent Of Staff After Meta's $14.8B Investment

'I've made the decision to restructure several parts of the GenAI organization. I believe these changes will best position us for the long-term, make the org more efficient, and allow GenAI to focus on the biggest and most profitable opportunities,' wrote Scale AI's interim CEO in a Wednesday email to employees. The fallout from a massive investment by Facebook parent company Meta in Scale AI appears to be starting as Scale AI moves to cut about 14 percent of its workforce. Business Insider Wednesday reported that San Francisco-based Scale AI has laid off about 200 of its full-time employees and about 500 contractors, citing company sources. The move comes just one month after Meta unveiled a plan to invest $14.8 billion in Scale AI, giving Meta a 49 percent stake in the company. That investment valued Scale AI at over $29 billion. [Related: The 10 Hottest AI Startup Companies Of 2025 (So Far)] With that investment, Meta also brought in Scale AI's founder and CEO at the time, Alexandr Wang, to become Meta's new chief AI officer. Wang is also spearheading Meta's new "Superintelligence" initiative. Replacing Wang as interim CEO was Jason Droege, who had served as chief strategy officer since joining the company in August of 2024. Scale AI had a full-time workforce of about 1,400 people, Business Insider reported. The 200-person layoff represents a cut of about 14 percent. Business Insider reported the layoffs were abrupt, with impacted employees shut out of the company's systems early in the morning. Scale AI did not respond to a CRN request for further information by press time. The layoff comes as Google and other large clients have halted projects they had with Scale AI after the Meta investment, as well as questions around training document security practices, Business Insider reported. In an email to Scale AI employees published by multiple news outlets, Droege said the layoffs come from a restructuring aimed at a focus on GenAI. "I've made the decision to restructure several parts of the GenAI organization. I believe these changes will best position us for the long-term, make the org more efficient, and allow GenAI to focus on the biggest and most profitable opportunities," Droege wrote.

Scale AI Slashes 14% Of Workforce After Meta's $14 Billion Investment - Meta Platforms (NASDAQ:META)

Scale AI, a San Francisco startup, recently celebrated a $14.3 billion investment from Meta Platforms, Inc. META. Shortly afterward, it laid off 14% of its total staff. The Details: The artificial intelligence company confirmed Wednesday that it is reducing its workforce by 200 full-time employees. Among those unscathed is Scale AI's founder, billionaire Alexandr Wang, who Meta tapped to lead its AI efforts. Scale AI's interim CEO, Jason Droege, who stepped into the role after Wang's departure, acknowledged in a memo to staff that the company expanded its generative AI operations too rapidly and developed unnecessary bureaucracy, according to CNBC. Droege emphasized that Scale AI remains financially strong and well-resourced, despite the cuts. Read Next: Rare Earth Royalty: Meet The Power Players Shaping The Industry Droege wrote that these organizational changes are designed to help the company become more agile and better prepared to respond to evolving market demands. "This structure will allow us to better serve the customers we have today and win back customers that have slowed down work with us," Droege wrote in the memo. Droege added that Scale AI intends to boost hiring significantly in the latter half of the year, especially in its application, enterprise and public sector divisions. Trending Investment OpportunitiesAdvertisementArrivedBuy shares of homes and vacation rentals for as little as $100. Get StartedWiserAdvisorGet matched with a trusted, local financial advisor for free.Get StartedPoint.comTap into your home's equity to consolidate debt or fund a renovation.Get StartedRobinhoodMove your 401k to Robinhood and get a 3% match on deposits.Get Started At the time of these layoffs, Scale AI employed about 1,400 people globally. Scale AI spokesperson Joe Osborne said that departing employees will receive severance packages. The company will also discontinue work with 500 contractors worldwide. Osborne added that the company is restructuring its data business to provide improved solutions for its generative AI customers. The plan is to invest heavily and hire in its enterprise and government AI sectors. Why It Matters: Meanwhile, Meta has been aggressively hiring AI talent to better compete with industry rivals like OpenAI. CEO Mark Zuckerberg chose Wang to lead Meta's newly established Meta Superintelligence Labs as chief AI officer. Only a handful of Scale AI employees have joined Meta as well. Meta also recently recruited two prominent researchers from OpenAI -- Jason Wei and Hyung Won Chung -- to join its new superintelligence lab. This recruitment is part of Meta's broader strategy. The Facebook parent is reportedly making compensation offers as high as $300 million over four years. Read Next: Joby Aviation Stock Goes Vertical As Secret, Massive Drone Achieves 9-Hour Flight Photo: Shutterstock METAMeta Platforms Inc$703.77-0.93%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum86.52Growth92.15Quality87.34Value26.47Price TrendShortMediumLongOverview This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs