Meta Expects To Shell Out $2B This Year To Get Out Of Office Leases
Silicon Valley giant Meta has revealed the substantial cost of its efforts to back out of office leases this year.
Dave Wehner, chief financial officer of the company that owns Facebook, Instagram, WhatsApp and other platforms, said on its third-quarter earnings call Wednesday that Meta expects to lose roughly $2B from its cutback in office leases this year.
California-based Meta embarked on a series of cost-cutting measures as its stock price plunged this year and revenue growth slowed.
Wehner said the company is willing to take a financial hit in the near term from backing out of leases in order to protect its budget for next year. Meta reported $84.4B in total revenue for the first nine months of the year, and it expects fourth-quarter revenue to exceed $30B.
"We have increased scrutiny on all areas of operating expenses," Wehner said on the earnings call. "Some steps, like the ongoing rationalization of our office footprint, will lead to incremental costs in the near term. This should set us up well for future years, when we expect to return to higher rates of revenue growth."
The fallout from Meta's office footprint rollback has struck multiple markets. In Mountain View, California, the tech giant ended a two-building, 457K SF lease earlier this year. Meta also confirmed to Bisnow it was backing out of a 200K SF Manhattan lease earlier this month and previously said it was putting other New York office expansion plans on ice.
In the third quarter alone, impairment costs for Meta totaled $413M. The company is also slowing hiring to manage expenses, CoStar reported.
The Facebook parent isn't the only tech company bracing for a tough winter. Alphabet Inc. Chief Financial Officer Ruth Porat said the firm was also slowing hiring during the Google parent's Q3 earnings call.
Other big tech companies have backed out of offices too. In August, Lyft revealed it was looking to sublease nearly half of its office holdings across San Francisco, New York City, Seattle and Nashville, Tennessee. And Yelp said in June it was closing offices in New York, Chicago and D.C.