The S&P 500 is currently at an all-time high, while the Nasdaq has reached its peak in the last two years. Alphabet, Meta, and Microsoft achieved new milestones on Thursday, with Microsoft surpassing a $3 trillion market cap.
Tech companies cut more jobs ahead of earnings.
Although Wall Street is applauding Silicon Valley, the tech industry is witnessing a surge in downsizing. In January alone, around 23,670 employees have faced layoffs across 85 tech firms, as reported by Layoffs.fyi. This marks the highest figure since March last year when nearly 38,000 individuals exited the sector.
This week, SAP revealed plans for workforce changes affecting 8,000 staff, while Microsoft initiated layoffs, affecting 1,900 positions in the gaming division. Moreover, fintech startup Brex reduced its workforce by 20%, and eBay implemented a 9% cut, amounting to 1,000 jobs. In a memo to employees, eBay’s CEO, Jamie Iannone, emphasized the need for improved team organization to enhance agility and decision-making speed.
At the beginning of this month, Google confirmed several job cuts, and Amazon eliminated numerous positions across Twitch, Prime Video, MGM Studios, and Audible segments. Also, Unity is reducing its staff by approximately 25%, and Discord, a popular messaging service among gamers, is letting go of 17% of its workforce.
Job cuts a response of rising inflation and interest rate hikes
The recent surge in activity preceded an anticipated wave of technology earnings from major companies like Alphabet, Apple, Microsoft, Amazon, and Meta. Investors appreciate cost-saving measures implemented in response to challenges such as inflation, interest rate increases, recession fears, and the 2022 market downturn. Despite a more positive economic outlook, a focus on frugality remains.
Job reductions peaked in January of the previous year, with 277 tech firms downsizing by almost 90,000 positions. This trend unfolded amid the tech industry’s challenges at the end of a decade-long bull market. Workforce adjustments were most prominent in the first quarter of 2023, gradually decreasing each month until a slight uptick towards the year’s end.
According to Meta’s CEO, Mark Zuckerberg, 2023 was designated as the “year of efficiency,” resulting in a nearly 200% increase in stock value, accompanied by a workforce reduction of 20,000 employees. Industry-wide, the focus on artificial intelligence became prominent, with emerging generative AI technologies showcasing the possibilities of automating customer service, streamlining travel bookings, and innovating marketing campaigns.
The heightened emphasis on AI has sparked concerns across various sectors about the diminishing reliance on human labor as technology advances. However, the immediate impact on the workforce is evident, with certain tech companies downsizing specific departments to allocate more resources towards the development of AI products.
Company executives are using varied language to communicate downsizing messages to both employees and investors. Despite the different phrasing, the common thread is a shared goal of achieving greater focus.
For instance, Microsoft Gaming CEO Phil Spencer framed the layoffs as part of an overarching “execution plan” aimed at minimizing “areas of overlap,” following the recent acquisition of Activision Blizzard. SAP, in its restructuring announcement, emphasized a focus on enhancing “key strategic growth areas,” with a particular emphasis on Business AI.
