Since the start of 2022, there have been more than 216,000 tech layoffs, with over 57,600 occurring last month alone. The prevalence of this trend is increasing, with new companies announcing major cuts every day.
In January 2023, Amazon announced its largest workforce reduction in the company’s 28 years of business, beginning the process of laying off 18,000 employees, after cutting many jobs just two months prior. Amazon CEO Andy Jassy explained in a blog post directed at employees, “These changes will help us pursue our long-term opportunities with a stronger cost structure; however, I’m also optimistic that we’ll be inventive, resourceful, and scrappy in this time when we’re not hiring expansively and eliminating some roles.”
Other tech giants have also made recent employee layoffs, including Microsoft—who cut 5% of its workforce—Google, Salesforce, and Meta.
What’s to blame for these swift changes and shift in priorities among big tech companies? Most CEOs are saying that increased hiring during the COVID-19 pandemic left them with a surplus of employees in its aftermath. Additionally, they are also being forced to make tough decisions about the future of big tech and how to drive revenue during uncertain times.
In this article, you’ll learn why big tech companies are reducing their workforce, who is being impacted, and what this means for the broader economy.
- Over 216,000 tech employees have been laid off since the beginning of 2022.
- In 2022, 1,039 tech companies announced tech layoffs, and 185 companies continued the trend in 2023.
- Reasons for these widespread layoffs include post-pandemic strategy changes, increasing interest rates, changing consumer trends, and more.
- Despite big tech workforce cuts, companies are still investing heavily in technological advancements, including AI, digital healthcare, climate tech, and the metaverse.
Big Tech Companies With Big Layoffs
In the last year, a long list of tech companies has slashed a percentage of their workforce. Tesla announced in June that they would be cutting 10% of their employees, and recently declared a hiring freeze with additional layoffs expected in 2023. Other examples are Salesforce, a software company that recently eliminated 10% of its workforce and Facebook’s parent Meta, who announced in November that it would cut 13% of its staff.
Big tech layoffs since the start of 2022 include:
- Amazon: 18,000
- Microsoft: 10,000
- Alphabet/Google: 12,000
- Meta: 11,000
- Salesforce: 7,000
- Twitter: 3,700
- Stripe: 1,100
- Shopify: 1,000
- Tesla: 6,000
- Spotify: 600
- Netflix: 450
- Crypto.com: 500
- Coincase: 2,000
- Lyft: 700
Why Are There so Many Tech Layoffs?
Major tech layoffs have impacted just about every big company in the industry, but why? There are several reasons to explain this occurrence, including the following:
1. Post-Pandemic Changes in Company Strategy
When sales spiked for tech companies during the pandemic from 2020 to 2021, demand for workers escalated and this called for sudden growth. E-commerce platforms like Amazon were forced to hire more workers, adding over 400,000 employees from 2020–2022, which more than doubled the company’s corporate staff. Meta also almost doubled its workforce between March 2020 and September 2022.
But now that sales have normalized, Amazon, Meta, and others are in reset mode. Additionally, executives are getting more pressure from investors to scale back on spending and increase revenue.
2. Reduced Spending by Digital Advertisers
The online ad market declined in 2022, reducing advertising dollars that many big tech companies relied on. Last year, Meta, Twitter, Google, Apple, and Microsoft all reported shrinking advertising budgets, which is believed to result from recent economic uncertainties. YouTube advertising revenue, for example, dropped 2% from 2021 to 2022, falling short of estimated earnings by $350 million.
According to a World Federation of Advertisers survey that includes 43 multinational companies, nearly 30% of major advertisers say they are cutting their ad budgets in 2023, and 74% of them said the economic downturn is influencing this decision.
3. Changes in Market Conditions
In a letter Google CEO Sundar Pichai sent to employees on January 20, 2023, he wrote, “Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.”
Since the pandemic-fueled growth, however, big tech companies have experienced drastic declines in momentum. Google’s parent company, Alphabet, went from 41% revenue growth in 2021, to 6% in 2022. This is the weakest expansion period for the company in a decade, other than one early period of the pandemic.
4. Fluctuations in Consumer Trends
Compared to 2020–2021, a report from Medallia Market Research shows that consumers are engaging in fewer at-home activities, watching less content on television and streaming services, and cutting back on general spending. In 2022, 49% of consumers say that product price changes have affected their purchase decisions, compared to 29% in 2021.
Across the whole population, 44% of consumers say their ability to pay all of their required bills is worse than a year ago, whereas only 15% say it is better.
In a note to employees explaining January layoffs, Co-CEO of Salesforce Mark Benioff wrote, “The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions.” Indicating that consumers are spending less on tech products and services, Benioff said that there has been a pullback in corporate spending, with a focus on cutting costs to make up the difference from lost revenue.
5. Higher Interest Rates
Recent economic downturns, including increased interest rates and the threat of a recession, have caused tech companies to reduce their workforce. In December 2022, the Federal Reserve raised interest rates to the highest level in 15 years, to a targeted range between 4.25% and 4.5%. Along with this increase came an indication that rates are expected to increase through next year, with no reductions until 2024. For comparison, the federal funds rate was around zero at the beginning of 2022.
In the Wall Street Journal podcast Your Money Briefing, reporter Hannah Miao explained, “A lot of those tech stocks are fairly expensive, but investors have been able to justify the higher prices because the companies forecast big growth in the future. But when interest rates are higher, that makes future profits appear less valuable.” For investors, high interest rates have made it harder to justify buying more expensive stocks.
6. Advancements in Technology
In 2022, over $120 billion was invested in building out metaverse technology and infrastructure, including by companies Meta, Amazon, Roblox, and Microsoft. Even after announcing its job cuts, Meta continues to invest in Reality Labs, a platform that produces virtual reality, augmented reality, metaverse hardware—like headsets—and artificial intelligence. Many in the tech industry have followed suit, investing in these technological advancements that are deemed the future of big tech.
In his letter to employees, Google CEO Sundar Pichai wrote, “I am confident about the huge opportunity in front of us thanks to the strength of our mission, the value of our products and services, and our early investments in AI. To fully capture it, we’ll need to make tough choices.”
What About Apple?
While many other tech giants have cut thousands of jobs in the last year, Apple has been holding steady. While they are expected to report a sales decline this quarter, which will be the first in three years, and hiring has slowed, reports indicate that there are several reasons why Apple has been able to avoid major cutbacks.
What makes Apple different?
- The company has practiced restrained hiring, even during the pandemic years. While Amazon’s employee count doubled and Microsoft increased its workforce by 53%, Apple’s grew by about 20%, according to a recent article in the Wall Street Journal.
- Apple also doesn’t scale up or invest to the degree of companies like Meta and Google to support new projects that will take time to turn over profit, like the metaverse. Meta, for example, spent $36 billion on its Reality Labs division in 2019, according to Business Insider, while it only made $5.3 billion in revenue.
What Does This Mean for the Broader Economy?
Trends in the broader economy, including these major tech industry layoffs, increased interest rates, and the impacts of inflation have many wondering if more negative outcomes are yet to come.
Some experts have warned that the tech industry serves as a leading indicator of what’s to come across the board. A November article in Fortune states that the tech layoff trend “could be a bellwether for the larger economy.” Plus, according to a recent survey, 90% of U.S. CEOs believe that a recession is coming.
However, the tech sector makes up only about 2% of the United States workforce and although it tends to be ahead of the curve with strategy shifts, it’s also more market-sensitive than other national industries. As of December 2022, the U.S. unemployment rate is 3.5%, with job gains reported in leisure and hospitality, health care, construction, and social assistance. There was also a 3.2% annualized growth rate in the third quarter of 2022.
With so many millennials in the workplace and other employees out of work, this may be an ideal time for other business sectors to bring on talented people.
It’s likely too early to tell whether or not these tech layoffs will trickle down into other business sectors, but recent history has shown that many companies react to big tech trends. When tech gets a sniffle, the rest tend to get a cold.
What’s Next for Big Tech Companies and Their Unemployed Workers?
Tech layoffs are expected to continue as the Federal Reserve keeps increasing interest rates in an attempt to decrease consumer demand and restore price stability. But some experts believe that big tech will make a comeback in 2023, especially if they focus on divisions that will be useful to consumers during a potential recession.
Despite their workforce cuts, big companies are still investing heavily in technological advancements, including AI, digital healthcare, climate tech, and the metaverse. In a January letter to Microsoft employees, CEO Satya Nadella wrote, “The next major wave of computing is being born with advances in AI, as we’re turning the world’s most advanced models into a new computing platform.” In this context, Microsoft and many other tech giants are being strategic about how they spend investor money.
Despite this setback in the tech space, former employees are being selective about where to focus their attention next. Many of them are highly skilled developers and software engineers, and the companies they join will likely be at the forefront of innovative technologies and concepts, including cybersecurity, electric vehicles, and cloud storage—all elements of the metaverse future.
This is an ideal time for tech workers to take on roles that are more in line with their values, whether that’s more remote work flexibility, greater emphasis on personal and professional development, options for a 4-day workweek, or doing something with a more significant impact. If you’re someone who’s been recently laid off, this interim may serve as the perfect time to fine-tune your vision statement and adjust your professional course for the better.
Leaders Media has established sourcing guidelines and relies on relevant, and credible sources for the data, facts, and expert insights and analysis we reference. You can learn more about our mission, ethics, and how we cite sources in our editorial policy.
- Layoffs.fyi. (2023, January 17). Layoffs.fyi – Tech Layoff Tracker and Startup Layoff Lists. https://layoffs.fyi
- Jassy, A. C. A. A. (2023, January 4). Update from CEO Andy Jassy on role eliminations. US About Amazon. https://www.aboutamazon.com/news/company-news/update-from-ceo-andy-jassy-on-role-eliminations
- Lambert, F. (2022, December 21). Tesla (TSLA) to implement hiring freeze and new round of layoffs. Electrek. https://electrek.co/2022/12/21/tesla-tsla-hiring-freeze-layoffs/
- Soper, T. (2022, October 28). Amazon is dramatically slowing its hiring pace. GeekWire. https://www.geekwire.com/2022/amazon-is-dramatically-slowing-its-hiring-pace/
- Duffy, C. (2023, January 22). How Big Tech’s pandemic bubble burst. CNN. https://edition.cnn.com/2023/01/22/tech/big-tech-pandemic-hiring-layoffs/index.html
- Duffy, C. (2022, July 29). The online ad market is in decline and it’s dragging down tech giants with it. CNN. https://edition.cnn.com/2022/07/29/tech/big-tech-ad-market-decline/index.html
- World Federation of Advertisers, W. (2022, November 14). Marketing budgets under heavy scrutiny, WFA and Ebiquity research. World Federation of Advertisers. Retrieved January 26, 2023, from https://wfanet.org/knowledge/item/2022/10/13/Marketing-budgets-under-heavy-scrutiny-WFA-and-Ebiquity-research
- Pichai, S. (2023, January 20). A difficult decision to set us up for the future. Google. https://blog.google/inside-google/message-ceo/january-update/
- Custage, A. (2022, October 18). The Biggest Consumer Behavior Trends of 2022 (So Far). Medallia | Customer Experience and Employee Experience. https://www.medallia.com/blog/consumer-behavior-trends-2022-so-far/
- Cox, J. (2022, December 15). Fed raises interest rates half a point to highest level in 15 years. CNBC. https://www.cnbc.com/2022/12/14/fed-rate-decision-december-2022.html
- Journal, T. W. S. (2022, November 1). Tech Stocks Are Way Down. Why Rising Interest Rates Are the Culprit. – Your Money Briefing – WSJ Podcasts. WSJ. https://www.wsj.com/podcasts/your-money-matters/tech-stocks-are-way-down-why-rising-interest-rates-are-the-culprit/9afba291-af38-4a40-86db-42bc3d64a0f2
- Krishnan, A. (2022, November 18). Top metaverse investors and how to start investing. CIO. https://www.techtarget.com/searchcio/tip/Top-metaverse-investors-and-how-to-start-investing
- Pichai, S. (2023b, January 20). A difficult decision to set us up for the future. Google. https://blog.google/inside-google/message-ceo/january-update/
- Tilley, A. (2023, January 21). How Apple Has So Far Avoided Layoffs: Lean Hiring, No Free Lunches. WSJ. https://www.wsj.com/articles/how-apple-has-so-far-avoided-layoffs-lean-hiring-no-free-lunches-11674274185?page=1
- Meta has pumped $36 billion into its metaverse and VR businesses since 2019. These 4 charts show the scale of its extreme spending — and huge losses. (2022, October 29). Business Insider. https://www.businessinsider.com/charts-meta-metaverse-spending-losses-reality-labs-vr-mark-zuckerberg-2022-10?international=true&r=US&IR=T
- Bove, T. (2022, November 4). Silicon Valley is telling us something about the recession to come with a huge wave of layoffs and hiring freezes this week. Fortune. https://fortune.com/2022/11/03/tech-company-layoffs-are-a-recession-signal-apple-stripe-lyft-amazon-twitter/
- Blogs, M. C. (2023, January 23). Subject: Focusing on our short- and long-term opportunity. The Official Microsoft Blog. https://blogs.microsoft.com/blog/2023/01/18/subject-focusing-on-our-short-and-long-term-opportunity/