Why do tech giants continue to cut jobs despite good results?

SAN FRANCISCO — After a year of massive layoffs, job cuts at the tech industry’s biggest companies have been extended through 2024.

Google started the year by laying off several hundred employees and promising more layoffs in the future. Amazon was next, cutting hundreds of positions in its Prime Video department. Meta reduced middle management. Microsoft eliminated 1,900 jobs in its video game division.

The layoffs continued even as sales and profits increased and stock prices rose. Tech industry experts and analysts say this disconnect stems from the frantic expansion of the workforce during the pandemic, while now being driven by an aggressive move toward building artificial intelligence.

Meta CEO Mark Zuckerberg said on a recent call with analysts that his company had to lay off staff and control costs “to invest in these ambitious, long-term visions around AI.” He said he realized that “we work better as a lean company.”

From late 2019 to 2023, technology companies struggled to keep up with the explosion in demand from consumers sitting at home. Apple, Amazon, Meta, Microsoft and Google’s parent company Alphabet added more than 900,000 jobs combined.

When that boom ended they made adjustments. Meta, Amazon, Microsoft, Google and Apple eliminated about 112,000 jobs at their respective peaks in 2021 and 2022. But they were still larger and more profitable than before the pandemic began.

The five companies employ 2.16 million people today, 71 percent more than before the pandemic. They generated sales of $1.63 billion in their most recent fiscal year, up nearly 81 percent from five years ago. Wall Street has rewarded him. In the past year, Meta, Amazon, Microsoft, Google and Apple added nearly $3.5 trillion in market value.

“We go through these cycles where you have an intense focus on innovation, and then the pendulum swings and there’s an intense focus on financial results,” said Tim Herbert, research director at technology research and education organization CompTIA. “But when I read that Amazon is cutting Alexa staff or Google is cutting staff on its Pixel phones, it tells me there’s a focus on margins. “They’re making cuts where they can and reallocating resources.”

Generative AI has changed everyone’s business priorities.

Major technology companies are rushing to hire engineers to build AI systems. CompTIA says there were 180,000 AI-related job vacancies in the United States last year, including positions in software development, semiconductor engineering and cloud computing. The number of job offers in AI has increased 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 launch later this year.

Companies are spending billions of dollars on the supercomputers and chips needed to train and build AI systems. By the end of the year, Meta expects to purchase 350,000 specialized Nvidia chips, which cost about $30,000 each.

This coincides with cuts elsewhere. Google reduced the number of people working on augmented reality technology. Meta, which laid off about 20,000 employees last year, is laying off some of its program managers, who oversee projects and are responsible for keeping teams on schedule.

Since then, Amazon has eliminated about 30,000 corporate positions and about 50,000 other jobs, a person with knowledge of the changes said, and its leadership has made clear that these jobs won’t be coming back anytime soon.

Unlike its competitors, Apple showed restraint in hiring during the pandemic. But the company began reducing its workforce last year when sales of iPhones, iPads and Macs fell. For the first time in at least 15 years, it reported a decline in its overall headcount, although it avoided major layoffs.

Microsoft did not report any reduction in its overall headcount. 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 value is now more than $3 billion.

By: Trip Mickle