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• Twenty-six employees sued Meta, saying it used AI systems to help select workers for layoffs.
• The lawsuit says AI usage metrics penalized workers who took medical, parental, or disability leave.
• A Meta spokesperson said that the “claims lack merit and are not based on facts.”

Meta used AI-powered workplace systems to penalize employees for taking medical and parental leave and then selected them for layoffs, according to allegations in a new lawsuit.

The complaint, filed by 26 current and former workers on Monday in federal court in Northern California, alleges that Meta relied on AI-assisted tools and employee-monitoring data to score and rank workers before cutting about 8,000 jobs in May.

The plaintiffs allege that the process relied on metrics such as work output, software development activity, and AI tool usage that employees could not accrue while on protected leave. By failing to adjust those measurements for time away, the suit alleges, Meta effectively recorded medical leave, maternity leave, and disability-related reductions in output as underperformance.

“Meta did not assemble the termination list through the considered judgment of managers who knew the work,” the complaint says.

Instead, the employees allege, the company relied on systems including its internal AI chatbot, Metamate; AI usage dashboards; employee-trained “second-brain” agents designed to reproduce parts of a worker’s output; activity-monitoring data; and AI-assisted performance and calibration tools.

They allege that Meta ranked employees using internal AI-adoption categories such as “AI Native,” “AI First,” and “AI Enabled,” and that employees’ scores declined when they were away from work. The allegations have not been tested in court.

“These claims lack merit and are not based on facts,” a Meta spokesperson told Business Insider. “Workforce management and organizational decisions were and are made by people, not AI.”

The case comes as Meta has pushed employees to use AI more heavily and tracked adoption through internal dashboards and leaderboards. Other major companies, including Disney, JPMorgan, and Visa, have also begun measuring employee AI usage.

The lawsuit against Meta referenced internal AI programs the company introduced this year. Meta had installed software on many US employees’ computers to capture keystrokes and mouse movements as training data for its AI models, prompting employee protests over privacy and the program’s mandatory nature, Business Insider reported in April. The lawsuit alleges that data from this monitoring program also helped feed Meta’s layoff-selection systems.

Meta paused the program in June after an internal leak made the data widely accessible across the company.

Meta also introduced a performance system called Checkpoint this year, placing greater emphasis on outcomes and giving the company’s top-rated workers significantly larger bonuses. The lawsuit alleges that an AI-enabled element of Checkpoint made employee AI adoption a “core assessment metric.”

The complaint says several employees were selected for layoffs while on approved leave or shortly after returning from it. One engineer alleged that his manager blamed a lower rating on the “broken time” caused by an injury that prevented him from working. Another employee says a manager warned that taking medically approved leave would lead senior leadership to “definitely” nominate him for layoffs.

The employees are asking a judge to pause their terminations while their claims proceed in arbitration and to order an independent audit of Meta’s layoff selection process. They also want Meta to recalculate the selections without counting protected leave or disability accommodations against workers.

The plaintiffs, who have chosen to remain anonymous, worked at Meta across several states, including California, Washington, New York, Illinois, Pennsylvania, and Florida.

Reuters first reported on the lawsuit on Tuesday.

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• IBM warned investors of a shift in tech budgets as AI spending impacts other tech sectors.
• Security spending is increasing as companies react to AI-driven cybersecurity threats.
• As AI investment soars and memory prices surge, there’s only so much money to go around.

IBM‘s pre-earnings warning to investors reveals a new reality in the AI spending boom: There’s only so much money to go around, so some tech companies are winning at the expense of others.

The company said customers are shifting technology budgets in two important ways. First, they’re spending heavily on memory chips, servers, and storage to build AI infrastructure before expected price increases. Second, they’re diverting more money toward cybersecurity as companies race to defend against new AI-powered threats.

The result is what amounts to a giant sucking sound across corporate IT budgets. Money flowing into AI is leaving less available for other technology purchases, including IBM’s latest mainframe computers and the software that runs on them.

IBM said customers spent the final weeks of June buying servers, storage, and memory to lock in supply before prices rose, a much bigger shift than it expected. That hurt sales of its new Z mainframes and related software.

The company also blamed “rapidly evolving” cybersecurity concerns for delaying numerous large deals. IBM didn’t identify the cause, but Barclays analysts said the comments likely refer to Anthropic’s recently launched Mythos AI model, which has heightened concerns that AI can rapidly uncover software vulnerabilities. The analysts said companies appear to be accelerating security spending, potentially at the expense of other technology projects.

The market reacted accordingly. While IBM’s stock plummeted nearly 25%, shares of memory companies rose, with SK Hynix surging more than 20% on Nasdaq on Tuesday. Shares of cybersecurity vendors, including CrowdStrike and Palo Alto Networks, also jumped.

The bigger question is whether IBM is experiencing a temporary budget shuffle or something more lasting. “There was no indication that this trend has yet abated,” BNP Paribas analysts wrote in a note to investors on Tuesday. They expect IBM to share more on its outlook when the company reports results on July 22.

Barclays analysts argued the spending shift is probably temporary, with customers delaying mainframe purchases while they absorb higher infrastructure costs.

And this isn’t likely the SaaSpocalypse: IBM’s other software businesses, including Red Hat, continued to perform well, with revenue growth actually accelerating.

Let’s call it the “Mainframe-alypse.” Not sure that one will catch on.

Anyway, IBM’s warning highlights a broader trend emerging across enterprise technology: AI is forcing companies to make difficult choices about how existing technology budgets are allocated, producing clear winners and losers.

There’s only so much money to go around.

Sign up for BI’s Tech Memo newsletter here. Reach out to me via email at abarr@businessinsider.com.

• IBM’s CEO released a letter to shareholders on Tuesday to warn about a “performance shortfall.”
• The revenue miss renewed fears about a SaaSpocalypse.
• We gathered what business and tech leaders are saying about the letter — and its wider impact.

IBM is on pace to have its worst day ever on the stock market after saying it misread the AI spending boom.

On Tuesday, eight days before the company’s scheduled earnings call, CEO Arvind Krishna released a letter to shareholders that detailed a quarterly “performance shortfall,” including slimmer-than-expected revenue.

“While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization,” he wrote. “In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter.”

The warning quickly revived talk of a SaaSpocalypse — the fear that AI will erode the value of some traditional software companies. For months, investors have worried that businesses will need fewer software subscriptions as AI agents automate and build custom tools.

IBM is not a pure software-as-a-service company, and Krishna did not say AI had made its products obsolete. Instead, he said customers redirected spending toward increasingly expensive servers, storage, and memory — leaving less money available for some of IBM’s software and consulting services.

The shortfall is still touching a nerve among industry bigwigs. Companies are pouring money into the infrastructure needed to power AI, while investors increasingly question how much of that spending will ultimately flow to established software providers.

Here is what smart voices in business and tech are saying about the early announcement’s impact on the economy:

Chamath Palihapitiya — CEO at 8090 and Social Capital

Chamath Palihapitiya said IBM’s stumble reflects a much bigger problem facing the AI industry: Companies selling intelligence are making enormous sums, but it’s unclear whether their customers can turn those costs into profits of their own.

“The downstream ecosystem has to make money as well,” Palihapitiya said Tuesday when asked about Krishna’s letter on CNBC. “And then, the ultimate buyer of these tokens also has to make money.”

He stopped short of blaming IBM’s problems on its pivot to AI and cloud computing, and praised Krishna for repositioning the company.

Palihapitiya was less forgiving of IBM’s suggestion that rapidly evolving cybersecurity concerns distracted some customers during the quarter.

He said AI companies and their investors have repeatedly swung between extremes: describing the technology as an all-powerful breakthrough when raising money, then warning that it poses an existential threat when seeking regulation.

Jacob Bourne — Analyst at EMARKETER

Bourne told Business Insider in an email that IBM was hit with a “triple whammy.”

He said the AI buildout is directing corporate spending toward hardware rather than software and services. At the same time, investors are punishing legacy companies that appear to be falling behind. Finally, AI-native challengers such as Anthropic are putting additional pressure on traditional software business models.

“We can expect more quarters like this one, but I think it’s a disruption story, not necessarily an extinction one for legacy software companies,” he wrote. “Spending patterns will shift from the present focus, and the vendors that adapt their products to the changing market will stay competitive.”

Nicholas Mugalli — CEO and Principal at World Trade Securities

Mugalli wrote on X that he believes IBM is the first major casualty of a broader shift in enterprise spending.

He argued that IBM’s miss shows the limits of corporate budgets. As hardware became scarcer and more expensive, executives prioritized servers, storage, and memory over software deals that could be delayed.

“This is the SaaS reckoning arriving exactly the way it would,” Mugalli wrote, “not with cancellations, but with deprioritization. “

Mugalli predicted IBM would not be the last enterprise software company to feel that pressure, pointing specifically to Palantir and ServiceNow.

Dan Niles — founder of Niles Investment Management

Niles wrote on X that IBM’s warning was an example of the AI “speed bump” he has been expecting.

He also said that customers redirected spending toward AI late in the quarter, cutting into IBM’s mainframe and related software business. He said that much of that revenue is supposed to be recurring, making the shortfall more concerning.

“Given software is a back-end loaded business, I doubt this is the last casualty,” he wrote.

• As more people use AI-powered tools for coding, it’s fueling growth in a new crop of companies.
• The CEO of vibe-coding startup Emergent joins BI Live to unpack the impact of AI tools, and how he hires.
• Join the conversation live on Wednesday at 11 a.m. ET. to ask your own questions about vibe coding.

As AI gets better and better at writing code, where does that leave software engineers? And, how does it impact the the companies they work for?

Business Insider set out to answer these questions with a multi-part series, The Great Coding Reset.

The fear that AI will make legacy software giants irrelevant has rattled markets. But the companies building vibe-coding tools have attracted big dollars, and seen their valuations skyrocket.

On Wednesday at 11 a.m. ET, Business Insider Today’s Dan DeFrancesco sits down with the CEO of one of these fast-growing startups.

Mukund Jha is CEO and co-founder of Emergent which launched in 2025. As of January 2026, the company has raised $100 million.

Tune in live to hear about his company’s exponential growth, what Jha looks for when hiring software engineers, and how vibe coding is changing his industry.

Join the conversation below to ask your own question and share your opinions on vibe coding.

• Disney’s new “Moana” movie fell flat in its box-office debut.
• The movie avoided controversy, but didn’t excite audiences.
• It also faced competition from “Toy Story 5” and “Minions & Monsters.”

“Moana” bellyflopped in its box-office debut, and the miss should provide Disney film executives with some hard-earned lessons.

Disney’s new live-action remake about the uber-popular Polynesian princess failed to bring audiences aboard, with a $43 million domestic opening that was only slightly above the disastrous start for the “Snow White” remake last year.

“‘Moana’s’ performance this weekend certainly has everyone questioning the animation-to-live-action strategy often employed by Disney,” said Paul Dergarabedian, the head of marketplace trends at media research firm Rentrak.

The Mouse House has used sequels and remakes as an easy, low-risk way to generate tons of cash, though a flop for one of its most popular movies means this strategy may be losing luster with fans.

“Disney invented this live-action phenomenon based on their animated films, and they’ve had remarkable success with them,” said box-office analyst David Gross in a Sunday report. “But this opening isn’t close to Disney’s past remakes.”

Unlike the ill-fated “Snow White” adaptation, this “Moana” movie had no notable controversies, and it didn’t make polarizing creative choices like last May’s successful “Lilo & Stitch” remake (which brought in over $182 million in the US in its debut).

Here are the three key reasons “Moana” sank in its box-office opening weekend, according to analysts.

1. It’s all too familiar

The new “Moana” is “an almost shot-for-shot (and line-for-line, in some cases) remake of a five-star masterpiece,” Business Insider’s Gabbi Shaw wrote in a review of the live-action remake.

By mimicking the original “Moana,” Disney avoided angering audiences who might not have wanted to see major changes to the hit. But by declining to reimagine “Moana,” the live-action remake may not have excited fans either.

“The central conundrum with all of these remakes,” Shaw wrote in her review, is that Disney fans or parents with Moana-crazed kids could have simply put on the “superior animated film” instead of bringing the whole family to a theater.

Though controversy-free, the new “Moana” movie was something that “nobody was talking about, for better or worse,” said box-office analyst Scott Mendelson.

2. Too much ‘Moana’

Disney may have given audiences another “Moana” movie too soon.

The original animated film came out 10 years ago, and Disney struck gold with a billion-dollar “Moana 2” sequel in 2024.

Although the “Moana” movies are beloved, as they consistently rank among the most-watched films on streaming, kids may already be getting their fix of the princess from the comfort of their couch.

“This story wasn’t ready to come back, and audiences are not rushing to see it,” Gross said.

Analyst Shawn Robbins, the director of movie analytics at Fandango, said the timing of this “Moana” film missed the sweet spot.

“This live-action take arrived at least half a decade too early if the goal was for the box office to benefit from nostalgia and a generational hand-me-down to kids who didn’t see the original film in theaters or weren’t born yet,” Robbins said.

3. It faced stiff competition, including friendly fire

Another factor in the “Moana” remake’s slow start was that there are plenty of family-friendly films in theaters right now.

“The marketplace is a bit oversaturated with PG-rated family fare,” Dergarabedian said.

Disney decided to release the new “Moana” three weeks after its own smash-hit “Toy Story 5” and a week after “Minions & Monsters” from Universal, though that film has so far slightly underwhelmed.

Those films and the World Cup may have kept audiences elsewhere, Robbins remarked.

However, seeing movies isn’t always a zero-sum game. Mendelson said that family-friendly hits can spur rival movies, since kids see trailers in theaters and get excited.

“If people had wanted to see ‘Moana,’ they would have seen ‘Moana,'” Mendelson said.

• Jamie Dimon said he’s not sure if he’ll be CEO in three years, weeks after the succession race heated up.
• Dimon said there’s little to no chance he’ll run for political office once he steps down.
• Instead, the 70-year-old said he’ll likely write a book, teach, or pursue media.

Last month, JPMorgan gave the world a better idea of who might succeed Jamie Dimon as CEO. And Dimon just gave a better idea of what he might do once that successor takes the job.

Dimon, who has led JPMorgan since 2006, said that in addition to doing business “with people I like,” he’ll probably write a book about management or the financial crisis. Known as one of Wall Street’s more outspoken CEOs, Dimon said he might take on public-facing roles, though he kept the details sparse.

“I may teach somewhere, because I like teaching, and I might do something around a media-related thing,” he told Axios in an interview that aired on Saturday.

Many have speculated that Dimon might have his eyes set on the White House, but he said there’s “pretty much no chance” he would run for office.

“I’m very hard-pressed to think I should be doing something like that,” he said with a light laugh, adding that he’s never been a part of a campaign. “I’m a banker. I’m a New Yorker. I’m 70 years old. I’ve had a couple of health problems.”

Dimon underwent emergency heart surgery in 2020 and battled throat cancer in 2014.

He added that politicians and their families face tremendous public scrutiny, and, besides, he could have a significant impact from his current position. Dimon has recently spearheaded geopolitical projects at JPMorgan, like a $1.5 trillion effort to boost US dominance and security, and a sweeping “American Dream Initiative.”

That doesn’t mean Dimon and his colleagues won’t also weigh in on political issues in the more traditional sense — JPMorgan launched a series called “From the desk of” in May, where senior leaders share their opinions on public policy.

Though it’s hard for some to imagine the end of the Dimon era at JPMorgan, a new leader may step up in the next few years. When asked whether he’ll still be CEO in three years, Dimon said he didn’t know, repeating his common refrain that it’s up to the board and that he plans to stay on as executive chairman. In the past, he’s been known for saying he’ll be in the job at least five more years.

Troy Rohrbaugh and Doug Petno recently emerged as the frontrunners to succeed Dimon after becoming co-presidents of JPMorgan in June.