Less than a month after Meta invested US$14.3 billion (S$18.4 billion) in Scale AI and hired away its chief executive, the San Francisco-based data annotation company is laying off hundreds of workers in a sweeping restructure of its core operations.
On 16 July, Scale confirmed it has laid off 200 full-time employees—around 14% of its workforce—and ended contracts with 500 of its global data labelling contractors.
The company had employed roughly 900 full-time staff before the decision.
Despite the capital injection and Meta’s 49% stake in the business, interim CEO Jason Droege told employees in a memo that the company had expanded too quickly in 2024.
He admitted,
“We ramped up our GenAI capacity too quickly over the past year. While that felt like the right decision at the time, it’s clear this approach created inefficiencies and redundancies.”
The internal message also pointed to growing internal bureaucracy and “unhelpful confusion about the team’s mission” as reasons for the restructure, alongside shifts in market demand.
Droege, who stepped in after co-founder Alexandr Wang joined Meta to lead its new superintelligence unit, said the layoffs were essential to “streamline our data business to help us move faster”.
He added that the company plans to narrow its focus to data labelling projects specifically related to coding, language and audio.
Jason Droege, previously the Chief Strategy Officer, is now serving as the interim CEO at Scale.
Following the Meta deal, some of Scale’s biggest clients, including OpenAI and Google, reportedly scaled back their reliance on the firm.
Concerns have emerged over the level of visibility Meta might gain into the development pipelines of its competitors.
This has led some companies to seek alternative vendors, benefiting rivals such as Turing, Invisible Technologies, Labelbox and Uber.
Scale, once seen as the go-to vendor for high-quality AI training data, now faces stiffer competition amid changing client loyalties and a rapidly evolving generative AI ecosystem.
While the company is cutting hundreds of roles, Scale said it expects to hire again in the second half of 2025.
The focus will shift towards areas generating “nine figures” in revenue—primarily enterprise sales, custom AI applications, and government work, including contracts with the US Department of Defense.
Spokesman Joe Osborne reiterated that Scale remains “well-resourced” and intends to reallocate investment towards its fastest-growing divisions.
While job cuts are making headlines, the deeper story may be who gets access to what.
As Scale AI aligns itself more closely with Meta, it risks eroding trust with former partners who once relied on the firm’s neutrality.
In a world where AI development is the new arms race, companies will think twice before letting a competitor’s proxy handle their training data.
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