Big Tech Sends Troubling Signals, With More Layoffs to Come

A pedestrian walks in front of a Meta sign at Facebook headquarters in Menlo Park, Calif., on Oct. 28, 2021. (Justin Sullivan/Getty Images)

For the technology sector, 2022 has been the year of layoffs. From Amazon to Zillow, many of the tech titans have been trimming the fat and reducing their workforce numbers in response to growing recession fears, poor investment decisions, and lower revenues.

This year, there have been layoffs at more than 830 tech companies, affecting nearly 137,000 workers.

Will 2023 be more of the same?

Amazon

Amazon, the nation’s second-largest private employer, confirmed that it’s cutting approximately 10,000 jobs worldwide, representing about 3 percent of its workforce. The layoffs will affect its artificial intelligence, human resources, retail, and services units.

Dave Limp, senior vice president of devices and services, said in a statement that the $1 trillion online retail juggernaut is grappling with an “unusual and uncertain macroeconomic environment.”

“After a deep set of reviews, we recently decided to consolidate some teams and programs. One of the consequences of these decisions is that some roles will no longer be required,” he said.

In an internal memo on Nov. 17, Amazon CEO Andy Jassy warned that the corporation would continue to terminate employees in the coming year.

An Amazon Go retail store is seen at the Amazon.com Inc. headquarters in Seattle on Nov. 14, 2022. (David Ryder/Getty Images)

“I’ve been in this role now for about a year and a half, and without a doubt, this is the most difficult decision we’ve made during that time (and, we’ve had to make some very tough calls over the past couple of years, particularly during the heart of the pandemic),” Jassy wrote. “It’s not lost on me or any of the leaders who make these decisions that these aren’t just roles we’re eliminating, but rather people with emotions, ambitions, and responsibilities whose lives will be impacted.”

Meta

Earlier this month, Facebook parent company Meta announced that it would be laying off more than 11,000 employees, accounting for 13 percent of its staff. They'll receive 16 weeks of pay and two extra weeks for each year of service. Affected workers also will have their health insurance covered for six months.

In October, the company offered lackluster guidance for the fourth quarter. It also shared disappointing numbers during the third quarter: costs and expenses climbed by 19 percent year-over-year to $22.1 billion, the tech firm’s overall sales tumbled by 4 percent to $27.71 billion, and operating income fell by 46 percent to $5.66 billion.

“Today I’m sharing some of the most difficult changes we’ve made in Meta’s history. I’ve decided to reduce the size of our team by about 13 percent and let more than 11,000 of our talented employees go. We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through the first quarter,” Meta CEO Mark Zuckerberg wrote in a Nov. 9 letter to staff.

Meta CEO Mark Zuckerberg speaks at an event in New York on Oct. 25, 2019. (Drew Angerer/Getty Images)

“I want to take accountability for these decisions and for how we got here. I know this is tough for everyone, and I’m especially sorry to those impacted.”

Microsoft

Microsoft handed out pink slips to about 1,000 employees, affecting teams working on the Edge web browser, Devices, and Xbox. Although that represented a tiny percentage of the tech giant’s workforce of 220,000, Microsoft had fired workers two other times this year, including the latest one in July, when 1,800 employees were terminated.

In August, Microsoft also released about 200 staff members from its four-year-old Modern Life Experiences department, which has focused on professional consumers. In July, the company also made “structural adjustments” by laying off more than 1,800 people.

Snap

The struggling social media platform announced in August that it would be overhauling its workforce, slashing one-fifth of its payroll. In total, nearly 1,300 employees were fired, with much of the focus on workers in the hardware division, app and gaming development, and social mapping app Zenly.

Snap posted a $360 million net loss in the third quarter. That sent the stock cratering by more than 25 percent. Year to date, Snap shares have tumbled by nearly 80 percent.

Twitter

It took CEO Elon Musk about a week to fire nearly half of Twitter’s staff, totaling about 3,700 jobs. That was in addition to top Twitter executives, including CEO Parag Agrawal, Chief Financial Officer Ned Segal, General Counsel Sean Edgett, and Vijaya Gadde, head of legal policy, trust, and safety.

But reports suggest that the social network could see a considerable number of employees quit after Musk issued an “extremely hardcore” work ultimatum of “long hours at high intensity.”

He gave Twitter staff until 5 p.m. New York time on Nov. 17 to determine if they wanted to work for him, which triggered concerns that the website would crash that evening, leading to various trending hashtags, including “RIPTwitter” and “TwitterDown.”

Source: layoffs.fyi

Zillow

Real estate firm Zillow, based in Seattle, laid off 300 employees, affecting staff members in home and loans and closing services. That might seem in response to the significant downturn in the U.S. housing sector, but the company noted that the cuts were part of its “normal business processes.”

Zillow announced in November 2021 that it would lay off a quarter of its workforce, or nearly 2,000 people. The company still maintains a workforce of about 5,000 employees.

HP Inc.

The computer maker HP Inc. said on Nov. 22 that it will lay off 4,000 to 6,000 workers over the next three years in response to declining computer sales.

Why Is Big Tech Crumbling?

According to Layoffs.fyi, a web portal that monitors tech job cuts, there have been nearly 137,000 jobs lost this year.

That’s a far cry from during the COVID-19 pandemic, when the tech industry experienced an enormous boom. Many of these companies hired thousands of workers, despite a global economy that had been mostly shut down. More people shifted their lives to the online world, from shopping to streaming.

But the market is now preparing for a slowdown in multiple areas of the international marketplace.

The advertising business has been slumping. Many tech firms are reliant on ad revenue, but corporate earnings reports have highlighted a declining trend.

For example, Alphabet’s third-quarter earnings reported a 1.9 percent drop in YouTube ad revenue, Google Search revenues rose at a slower-than-expected pace of 4 percent, and Google Network revenues tumbled by 2 percent (pdf).

A woman looks at her smartphone as she walks past Google Building in New York on June 3, 2019. (Drew Angerer/Getty Images)

Investors are pressuring tech companies to cut costs, purporting that they would be too slow to respond to a recession with bloated payrolls.

Activist investor and billionaire hedge fund manager Christopher Hohn urged Alphabet “to take aggressive action” on labor.

“We are writing to express our view that the cost base of Alphabet is too high and that management needs to take aggressive action. The company has too many employees, and the cost per employee is too high,” Hohn, managing director at TCI Fund Management, wrote in a four-page letter on Nov. 15. “This growth is excessive, both in relation to historical headcount growth and what the business requires. Our conversations with former executives of Alphabet suggest that the business could be operated more effectively with significantly fewer employees.”

Last, tech leaders are now coping with the end of an era of cheap money. When the Federal Reserve slashed interest rates to zero and pumped trillions of dollars into the financial system, the cost of capital was inexpensive. This facilitated a climate of immense fundraising, bloated valuations, significant rallies in tech stocks, and opulent workplaces.

“What we’ve seen in the last few years was a cost of money that was zero,” Guillaume Pousaz, CEO of London-based payments software company Checkout.com, told CNBC during a panel discussion last week. “That’s through history very rare. Now we have a cost of money that is high and going to keep going higher.”

Now that central banks worldwide are taking away the spiked punch bowl by raising interest rates and removing monetary easing mechanisms, tech companies—large and small—are being forced to tighten their belts.