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AI industry data specialist Scale AI, is laying off 14% of its workforce, or about 200 employees, just one month after Meta took a multibillion-dollar stake in the company and hired its CEO and other staff.
According to Bloomberg, the layoffs include 500 of its global contractors, as part of a broader restructuring to streamline its data business.
Scale's CEO admits that the firm over-hired during its initial growth phase. Ironically, the use of AI will replace many of the outgoing roles, while many of the AI specialist's generative AI projects will be reduced.
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.
Scale AI layoffs and restructure
Last month, Meta paid $14.3billion for a 49% 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.
Jason Droege, CEO of Scale AI, sent an email to all Scale employees outlining plans to restructure several parts of Scale’s generative AI business and organize it from 16 pods to “the five most impactful”: code, languages, experts, experimental, and audio. The company will also reorganize its go-to-market team into a single “demand generation” team that will have four pods, each covering a specific set of customers.
“The reasons for these changes are straightforward: we ramped up our GenAI capacity too quickly over the past year,” Droege wrote. “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.”
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Droege said that he believes the changes to the company will make it more able to adapt to market shifts, serve existing customers, and win back customers that have “slowed down” work with Scale.
AI projects reduced
He also said that the company would deprioritize generative AI projects with less growth potential. “We remain a well-resourced, well-funded company,” he wrote. Scale’s generative AI business unit will have an all-hands meeting tomorrow, followed by a company-wide meeting on July 18th.
Osborne said that Scale plans to increase investment and hire hundreds of new employees in areas like enterprise, public sector, and international public sector, in the second half of 2025 and that severance has been paid out to impacted roles.
“We‘re streamlining our data business to help us move faster and deliver even better data solutions to our GenAI customers,” he said.
