Tech’s running it back… on its “year of efficiency.” Snap announced it would lay off 10% of its workforce (~540 employees). Snap — which is set to report earnings today — joined dozens of tech cos that’ve recently reduced headcount. Power players including Amazon, Google, and Microsoft have laid off 33K workers so far this year — more tech cuts than the second half of 2023. This year’s notable difference: a lot of the companies announcing layoffs are #thriving.
Before: Tech’s cuts last year came after the Fed hiked interest rates seven times in 2022 (recall: recession jitters were high).
Now: Rates have held steady since July, and last month the US added 353K jobs (almost twice what economists had expected). Moreover, Big Tech just reported blockbuster earnings. Meta tripled its profit, and Microsoft and Google notched record sales.
Tech’s new playbook… cut and sprint. Tech optimism has roared back — the Nasdaq is up 30%+ over the past year — but many of the industry’s issues remain, including pandemic overhiring. Despite all the gloom, Apple, Meta, Amazon, Microsoft, and Google still employ 71% more people than they did prepandemic. Google CEO Pichai hinted that rolling layoffs weren’t likely to end anytime soon, and Meta boss Zuckerberg said that the company’s leaner structure is here to stay.
Cutting costs comes with added costs… Techies have boosted profits by slashing payrolls, but overall spending remains high — though now it’s being funneled into multibillion-dollar AI investments instead of new hires. For the first time, some tech cos like Meta are starting to cite AI innovation as a factor in staff reductions. The downside: cuts can hurt productivity, and they aren’t free. Google’s recent layoffs will cost it $3B in severance expenses.