Scale AI to cut 14% of staff following Meta investment

[SAN FRANCISCO] Scale AI is laying off hundreds of employees from its data-labelling business, one-month after Meta Platforms invested US$14.3 billion in the startup and hired away its chief executive officer.

The company cut 200 full-time employees, about 14 per cent of its global workforce, and will provide severance, Scale spokesperson Joe Osborne said on Wednesday (Jul 16). Scale will also stop working with 500 of its thousands of global contractors, he said.

The move is aimed at “streamlining our data business to help us move faster,” Osborne said, adding that Scale plans to staff up in other areas including enterprise and government sales. In a note sent to Scale employees on Wednesday, interim CEO Jason Droege said the layoffs were a result of the data labelling business bringing in too many people too quickly over the last year. That led to “too many layers, excessive bureaucracy, and unhelpful confusion about the team’s mission”, Droege wrote in the memo, which was viewed by Bloomberg News.

Droege added that “shifts in market demand” also contributed to the decision to restructure. Following the deal with Meta, some of Scale’s most prominent customers have phased out work with the startup, including OpenAI and Alphabet’s Google, according to reports from Bloomberg and others.

Founded in 2016, Scale has long been the best-known name in the market for helping tech firms label and annotate the data needed to build artificial intelligence (AI) models. It generated about US$870 million in revenue in 2024 and expects US$2 billion in revenue this year, Bloomberg News reported in April.

In June, Meta finalised its multibillion-dollar investment in Scale, taking a 49 per cent stake in the company. As part of the deal, co-founder Alexandr Wang left the startup to lead a new superintelligence unit at Meta, part of the Facebook parent company’s multibillion-dollar investment to catch up on AI development.

Despite its position as a leader in the market for providing a key ingredient needed for building AI models, Scale faces a growing raft of rivals, including Turing, Invisible Technologies, Labelbox, and Uber Technologies, all of which also offer services to meet AI developers’ bottomless need for data. As some of Scale’s clients worried about Meta getting added visibility into their AI development process, competing services have said they’ve seen a surge in interest from customers.

In the memo, Droege said he hoped the changes will help position Scale for the long term, make it more efficient, and enable the data-labelling part of the startup to “focus on the biggest and most profitable opportunities”, he wrote. He also said that the new structure “will allow us to better serve the customers we have today and win back customers that have slowed down work with us”.

Scale is one of several AI companies that have seen key talent hired away in the last year, without being acquired. Most recently, Google inked a US$2.4 billion deal with AI coding startup Windsurf, hiring its CEO and several of its top staffers. The deals raise the question of what happens to the employees left behind after the CEO joins a larger firm.

In Windsurf’s case, the startup was quickly bought by another AI company. At Scale, the company plans to leverage its war chest, Droege said.

“We remain a well-resourced, well-funded company, and today’s announcement will allow us to accelerate new investments and add resources where necessary,” he wrote in the memo. Droege said the startup plans to hone the scope of its data-labelling business to focus on projects related to coding, languages and audio.

Osborne said the company plans to hire hundreds of people in the second half of the year for efforts including making custom AI applications and working with government agencies in the US, such as the Defense Department, and around the world. Those parts of the business are currently making nine figures in revenue, Droege previously told Bloomberg. BLOOMBERG