Why is Big Tech still cutting jobs?
The job cuts at the tech industry's biggest companies took place in the first month of 2024, after a year of massive layoffs.
Google started the year by laying off several hundred employees and promising more layoffs to come. Amazon then cut hundreds of jobs in its Prime Video department. Meta quietly eliminated middle management. Microsoft also cut 1,900 jobs in its video game division.
The layoffs continued even as sales and profits increased and stock prices rose. Tech insiders and analysts say the separation reflects an industry that is facing two major challenges: coming to terms with frenetic workforce expansion during the pandemic as well as taking aggressive steps to build artificial intelligence.
Now, instead of hiring thousands of people every quarter, companies are spending billions to create AI technology that they believe could one day be worth trillions.
Meta Chief Executive Mark Zuckerberg said in a call with analysts last week that his company would have to lay off employees and control costs “so we can invest in these long-term, ambitious visions around AI,” he said. That he came to realize that “we work better as a lean company.”
From late 2019 to 2023, tech companies struggled to keep up with the explosion of consumer demand as people stuck at home spent money on new computers and spent more time online. Apple, Amazon, Meta, Microsoft and Google's parent company Alphabet added more than 900,000 jobs combined.
When that boom ended, they were forced to make adjustments. Meta, Amazon, Microsoft, Google and Apple cut about 112,000 jobs from their respective peaks in 2021 and 2022. But they were still much larger and more profitable than before the pandemic began.
Today, the five companies employ 2.16 million people, 71 percent more than before the pandemic. Combined, they generated $1.63 trillion in sales in their most recent fiscal years, nearly 81 percent more revenue than five years ago.
Wall Street has rewarded him. Over the past year, Meta, Amazon, Microsoft, Google and Apple have added nearly $3.5 trillion in market value.
Despite significant cutbacks at many other companies, employment in the broader tech industry is still poised to grow again. In January, tech posted its second straight month of job growth, adding 18,000 workers, according to technology education and research organization CompTIA. Its unemployment rate of 3.3 percent is lower than the national average of 3.7 percent.
“We go through these cycles where you see this intense focus on innovation and then the pendulum swings and there's an intense focus on the bottom line,” said Tim Herbert, chief research officer at CompTIA. “But when I read that Amazon is cutting Alexa staff or Google is cutting staff at its Pixel phones, it tells me there's a focus on margins. “They are making cuts where possible and redeploying resources.”
Generative Artificial Intelligence has changed everyone's business priorities. The technology, which can answer questions, draw images and write code, became an overnight sensation after OpenAI's chatbot, ChatGPT, rose in popularity.
Tech's biggest companies are rushing to hire engineers to build AI systems. According to CompTIA, 180,000 AI-related jobs were posted in the United States last year, including roles in software development, semiconductor engineering and cloud computing. The number of AI jobs has expanded this year.
Those employees are helping Microsoft, Google, Amazon, and Meta improve chatbots and build other AI systems. Apple is hiring AI engineers as the company develops its own AI offering to be released later this year.
“Our MO, if you will, has always been to do the work and then talk about the work, not to get in front of ourselves,” Apple Chief Executive Officer Tim Cook said on a call with analysts last week. “But we've got some things we're incredibly excited about.”
Companies are spending billions of dollars on the expensive chips and supercomputers needed to train and build AI systems. By the end of the year, Meta hopes to buy 350,000 specialized chips from chipmaker Nvidia, which cost an estimated $30,000 each.
The emphasis on generic AI coincides with cuts elsewhere. Google's layoffs reduced the number of people working on augmented reality technology. Meta, which laid off about 20,000 people last year, is laying off some of its program managers, who oversee various projects and are responsible for keeping teams on schedule.
Over two years, 2020 and 2021, Amazon doubled its workforce to 1.6 million employees as it tried to keep up with the surge in e-commerce orders. The appointment included increasing the number of corporate jobs from 200,000 to 380,000. It has cut about 30,000 corporate jobs and about 50,000 other jobs, according to a person with knowledge of the changes, and its leadership has made clear that these jobs will not come back any time soon.
“We want to hold the line on head count,” Amazon Chief Financial Officer Brian Olsavsky said during a media call last week.
After laying off more than a thousand employees in January, Google warned employees that gradual layoffs could continue throughout the year. Ruth Porat, chief financial officer of Google's parent company Alphabet, said during a call with analysts last week that exceptions would be made for top engineers.
Unlike its competitors, Apple showed restraint in hiring during the pandemic. But last year, as sales of iPhones, iPads and Macs declined, the company began downsizing its workforce. For the first time in at least 15 years, it reported a decline in its overall headcount, although it avoided making major layoffs.
The 3,000 fewer jobs that Apple reported at the end of its most recent fiscal year were largely due to layoffs and encouragement of some managers to give tougher annual reviews, according to three people with knowledge of the company's strategy. Was abolished.
An Apple spokesperson declined to comment.
Microsoft is the only tech company that has not reported a reduction in its total workforce. The company expects to employ 221,000 people at the end of its 2023 fiscal year, on par with its post-pandemic peak.
Investors have rewarded Microsoft's stability. Last month, it dethroned Apple as the world's most valuable company. Its market cap now exceeds $3 trillion.
Nico Grant, mike isaac And Karen Weiss Contributed to the reporting.