Scale AI to Cut 14% of Staff Following Meta Investment

Scale AI is laying off 200 full-time employees, or 14% of its workforce, and stopping work with 500 contractors. The move is aimed at streamlining its data business and staff up in other areas such as enterprise and government sales. The layoffs are a result of the data-labeling business growing too quickly and shifts in market demand. Despite being a leader in the market, Scale faces growing competition and has seen some clients slow down work with the startup.

Scale AI, a leading provider of data-labeling services for artificial intelligence (AI) model development, has announced significant changes to its workforce. The company is laying off 200 full-time employees, representing approximately 14% of its global workforce, and will also cease work with 500 of its global contractors. These actions are part of a strategic move to streamline the data-labeling business and refocus resources on other areas such as enterprise and government sales [1].

The layoffs and contractor terminations follow a rapid expansion of the data-labeling business over the past year, which led to "too many layers, excessive bureaucracy, and unhelpful confusion about the team’s mission," according to interim CEO Jason Droege [1]. Additionally, shifts in market demand have contributed to the decision to restructure the business.

Despite its position as a market leader, Scale AI faces growing competition from other data-labeling services such as Turing, Invisible Technologies, Labelbox, and Uber Technologies Inc. [1]. Some of Scale’s prominent clients, such as OpenAI and Alphabet Inc.’s Google, have phased out work with the startup following the company's investment by Meta Platforms Inc. [1].

The layoffs and restructuring are aimed at positioning Scale AI for long-term success and making the data-labeling business more efficient. The company expects these changes to help it better serve its current customers and win back those that have slowed down work with the startup [1].

In a separate development, Meta’s investment in Scale AI has been a significant driver of the company’s recent growth and expansion. Meta Platforms Inc. invested $14.3 billion in Scale AI, taking a 49% stake in the company [1]. This investment has also led to the hiring of Scale AI's co-founder, Alexandr Wang, to lead a new superintelligence unit at Meta [1].

Meta’s investment in Scale AI is part of its broader strategy to catch up in AI development and address shortcomings in talent and compute resources. Meta has been investing heavily in AI talent, offering competitive compensation packages, and rethinking its approach to data center design to prioritize speed and efficiency [2].

References:
[1] https://www.bloomberg.com/news/articles/2025-07-16/scale-ai-to-cut-14-of-staff-following-meta-investment
[2] https://semianalysis.com/2025/07/11/meta-superintelligence-leadership-compute-talent-and-data/