San Francisco-based artificial intelligence company Scale AI has announced a major workforce reduction, laying off approximately 700 workers globally, including 200 full-time employees (14% of its total staff) and 500 international contractors. The move comes just one month after Meta Platforms Inc. invested $14.3 billion in the company and hired its founder and former CEO, Alexandr Wang, to lead Meta’s newly formed Superintelligence unit.
GenAI Restructuring in the Wake of Meta’s Entry
The layoffs are part of a large-scale restructuring that primarily affects Scale’s Generative AI (GenAI) division, which was responsible for projects involving major clients such as xAI’s Grok (Elon Musk) and Google Gemini.
In an internal memo obtained by The Verge, interim CEO Jason Droege admitted the company had ramped up GenAI “too quickly,” leading to excessive bureaucracy, inefficiency, and a lack of mission clarity.
“We ramped up our GenAI capacity too quickly over the past year,” Droege wrote. “Now we must realign the organization to become more focused and streamlined.”
New Strategic Focus: Enterprise and Government
As part of the pivot, Scale AI announced it will shift its primary focus to enterprise clients and government contracts. The company has consolidated its GenAI division from 16 teams into 5 core areas: code, language, expert, experimental, and audio.
This shift reflects a significant strategic overhaul following Meta’s influence on the company’s direction.
Abrupt Layoffs Spark Internal Frustration
As reported by SFGate, many employees were caught off guard, with their Slack and internal system access cut off before formal layoff notifications were sent. The abrupt manner of the layoffs has drawn criticism over the company’s transparency and internal communication.
Another Case of Reverse Acqui-Hire in AI
Scale AI joins a growing list of AI startups undergoing “reverse acqui-hire” scenarios, where top leadership and core teams are absorbed into tech giants-forcing the rest of the company to pivot or downsize dramatically.
A comparable example is Inflection AI, which saw much of its staff and IP acquired by Microsoft earlier this year. These cases underscore the volatile nature of the AI ecosystem in 2025.
Global Ripple Effect: From the U.S. to India and the Philippines
The layoffs impacted not only the company’s San Francisco headquarters but also its global contractor base in countries like India, the Philippines, and Eastern Europe-regions that have long served as hubs for outsourced data labeling operations.
This shift signals a reshuffling of global dynamics in AI data services and opens up opportunities for emerging players to fill the gap left by Scale’s retreat from this business model.
Conclusion: A Rapid Pivot With High Human Cost
Although Scale AI insists it remains well-funded and plans to hire in other strategic sectors, this wave of layoffs reveals that aggressive growth and corporate transformation in AI come at a significant organizational and social cost.
