Scale AI cuts 200 jobs after ramping up GenAI capacity too quickly

Scale AI is laying off 200 employees, or 14 percent of its workforce, along with 500 global contractors as part of a broader restructuring just one month after Meta’s $14.3 billion investment in the company. The cuts reflect the AI data labeling company’s acknowledgment that it “ramped up our GenAI capacity too quickly” over the past year, creating inefficiencies and redundancies in its operations.

What you should know: Scale AI provides data labeling services to major AI companies, using human workers to annotate training data for companies like Google, OpenAI, and Anthropic.

• CEO Jason Droege will restructure the company’s generative AI business from 16 pods down to five focused areas: code, languages, experts, experimental, and audio.
• The go-to-market team will be reorganized into a single “demand generation” team with four customer-focused pods.
• Despite the layoffs, Scale plans to hire hundreds of new employees in Enterprise, Public Sector, and International Public Sector roles in the second half of 2025.

The big picture: The layoffs come amid significant upheaval in the AI industry, with frequent mergers, acquisitions, and talent movement between companies.

• Last month, Meta paid $14.3 billion for a 49 percent stake in Scale AI and hired former CEO Alexandr Wang to lead a new superintelligence lab.
• Recent industry moves include OpenAI’s canceled deal with Windsurf and Google’s subsequent hiring of Windsurf’s leadership team.
• The restructuring reflects broader market pressures as AI companies adjust to shifting demand patterns.

What they’re saying: Droege was direct about the company’s missteps in his internal email to employees.

• “We ramped up our GenAI capacity too quickly over the past year,” he wrote. “While that felt like the right decision at the time, it’s clear this approach created inefficiencies and redundancies.”
• He added that the changes were necessary because “shifts in market demand also required us to re-examine our plans and refine our approach.”
• Scale spokesperson Joe Osborne emphasized the company’s focus moving forward: “We’re streamlining our data business to help us move faster and deliver even better data solutions to our GenAI customers.”

Why this matters: The layoffs signal that even well-funded AI companies are struggling to balance rapid growth with operational efficiency as the market matures.

• Scale’s restructuring suggests the company is prioritizing winning back customers that have “slowed down” work with the firm.
• The move to deprioritize generative AI projects with less growth potential indicates a more selective approach to market opportunities.
• Droege maintains that Scale remains “a well-resourced, well-funded company” despite the workforce reduction.