Scale AI is a rising name in the artificial intelligence industry, but it’s in the news for a more disappointing reason today. The data-labeling startup, Scale AI, is conducting layoffs at its organization, with the plan being to cut off 200 employees from its ranks. Scale AI’s workforce reduction plans will affect approximately 14% of its total headcount, significantly reducing its numbers despite the business’s streak of success. The news comes soon after Meta made a $14.8 billion investment in Scale AI’s offering in exchange for labor support at its own organization.
Bloomberg obtained the memo that was shared by interim CEO Jason Droege to announce the Scale AI layoffs. The memo detailed how the business had scaled up its generative AI capabilities “too quickly,” inflating the organization and adding in too many layers of “excessive bureaucracy” that complicated its operations. Scale AI’s downsizing news marks an alarming turn of events for employees, but the organization is hoping to keep its progress going with a more light-footed team to bolster its success.
The Scale AI layoffs are another example of success not being equated with employee retention in 2025. (Image: Freepik)
Scale AI Layoffs to Affect 14% of the Workforce as the Organization Primes Itself for Growth
Founded in 2016 but gaining more notoriety in recent years, Scale AI is a data labeling company that assists other AI businesses by providing training infrastructure and high-quality datasets that can be used to develop AI tools. The company recently saw a $14.8 billion investment from Meta, but lost its CEO and some key employees to the company in exchange for the funds. The Facebook parent now holds a 49% stake in the organization and stands to benefit from its success.
Meta has been on an expansion phase to grow its Superintelligence Labs team, and while part of that growth has occurred by poaching employees from other prominent AI businesses, the company also made a deal with Scale AI in hopes of benefiting from its expertise. Scale AI founder Alexandr Wang is currently set to lead the Meta team in developing its AI tools, which could mean that Meta will make some significant headway in 2025, however, Scale AI is not planning on just waiting around while it happens.
What We Know About the Scale AI Staff Cuts
The Scale AI layoffs will affect 200 workers, or approximately 14% of the company’s workforce, primarily in the GenAI division. The organization is also cutting ties with 500 of its global contractors as a part of a larger move to restructure and streamline its business. Droege, who became the sitting CEO of Scale AI as a replacement for Alexandr Wang, explained that he wanted to reorganize the company’s generative AI business into fewer divisions.
The company will go down from 16 pods to the “five most impactful ones,” which include code, languages, experts, experimental, and audio. The teams that work with the market will also be scaled down into a single team with four pods to target specific customers.
Explaining the reasoning behind the Scale AI staff cut, he stated that the company had “ramped up” their GenAI capacity too quickly in the last year, leaving it with “inefficiencies and redundancies.” All of this has resulted in “too many layers, excessive bureaucracy, and unhelpful confusion about the team’s mission.” With the changes in the market, the company believes it’s time to alter how it approaches its business.
As the GenAI Team Faces Cuts, Scale AI Plans to “Hire Hundreds”
A spokesperson for the company told The Verge that the company is scaling down its business in some regards, but it also plans to increase investments and hire hundreds of workers in the second half of 2025. This hiring drive will likely focus on areas like enterprise, public sector, and international public sector, which makes it evident that the Scale AI layoffs are not a result of low funding or poor profit margins but are intended to reshape how the business operates.
“We‘re streamlining our data business to help us move faster and deliver even better data solutions to our GenAI customers,” the spokesperson explained. The reports on Scale AI’s workforce reduction plans align with a significant trend we’ve observed across businesses, particularly in the tech sector, where employees are being hired and let go at a faster pace than ever before.
The drive to lead in AI innovation has pushed businesses to extreme measures, leaving an extremely disjointed and unstable workforce in its wake. While resorting to layoffs with great frequency, employers are also pushing for a return to the office, arguing that this will facilitate increased collaboration and unity. The changes and disorienting messaging have left employees alarmed and confused.
In 2025, it is now more important than ever to pause and consider the viability and long-term effects of a strategy before it is adopted. AI-based regrets are already showing up among business leaders, and while the technology has the potential to reshape a business, it should be explored with caution, keeping the interests of employees in mind every step of the way.
Are you surprised by the Scale AI layoffs, or was this an expected turn of events? Let us know what you think. Subscribe to The HR Digest for more insights into the ever-evolving landscape of work and employment in 2025.