Wall Street Interpreting Meta(META.US) Latest Developments: Model Delays Highlight Google(GOOGL.US) Advantages, Layoffs and Cost-Cutting Fail to Offset High AI Infrastructure Costs

Crypto Finance APP has learned that recently, news about Meta (META.US) delaying the release of its cutting-edge AI models and plans for layoffs has attracted market attention. Analysts generally expressed slight disappointment over the model delays and believe that the cost-cutting layoffs will have little impact on its projected $169 billion expenditure plan by 2026.

Last Friday, reports indicated that internal testing at Meta showed its AI model “Avocado” lagging behind competitors Google (GOOGL.US), OpenAI, and Anthropic in reasoning, coding, and writing capabilities, forcing a delay in its release schedule.

According to reports over the weekend, to cope with high costs of AI infrastructure and achieve efficiency gains from AI, Meta is planning to lay off more than 20% of its staff.

AI Model Delays Draw Attention

JPMorgan emphasized that, aside from advertising, Meta’s AI models are another key component of its bullish narrative, making the delay somewhat surprising. The firm pointed out that given Meta’s massive investment scale, its tolerance for failure is already quite limited.

JPMorgan analysis states: “Frontier models are crucial for Meta to realize its superintelligence vision, maintain long-term control over its own computing platform, and expand AI products beyond advertising. The market is also closely watching whether its substantial capital and operational expenditures related to the foundational model team will deliver expected results.”

Bank of America believes that, although the delay is disappointing, the adjusted release schedule indicates that Meta is prioritizing product performance quality over rushing to market.

BofA analysis notes: “Considering that the foundational model team was only established at the end of Q2 2025 and Q3 2025, we believe the original Q1 release target was quite challenging. The revised timeline instead reflects a more prudent development cycle. However, the challenges Meta faces also highlight Google’s strong position in large language models. Based on Gemini’s development trajectory, it may take several years for Meta to build a top-tier large language model.”

Impact of Layoffs

JPMorgan estimates that a 20% layoff could save Meta about $6 billion. But even if this savings is fully converted into profit, it would have little effect on the company’s total expenditure baseline for this year.

The firm further estimates that incorporating this $6 billion cost saving into 2027 profits and considering taxes could increase its GAAP earnings per share by about $2, above its current forecast of $31.50.

Bank of America shares a similar view, believing that cost reductions from layoffs are unlikely to materially lower the company’s full-year guidance.

BofA estimates that this move could save the social media and tech giant up to $8 billion, but this only offsets part of the projected $45 billion GAAP expenditure growth in its models.

Notably, Jefferies analysts state that if Meta is willing to undertake such large-scale layoffs while increasing AI investments, it indicates that “AI is increasingly becoming a key driver of productivity improvements.”

Jefferies further notes: “This is not only significant for Meta but will also profoundly impact the entire internet and software industry, prompting investors to reassess the relationship between company staffing, growth, and profit margins. We believe this could further pressure the SaaS sector’s seat-based charging models. Clearly, part of Meta’s layoffs are aimed at managing AI infrastructure costs, especially amid a sharp rise in capital expenditures.”

The firm adds that, in the context of increasing macroeconomic uncertainty, Meta’s layoffs appear logical. Given the close correlation between advertising spending and GDP growth, the company’s proactive measures to improve efficiency and prepare for potential economic downturns are entirely reasonable.