Technology companies have cut 34 thousand jobs since January to focus on AI – 02/11/2024 – Tech

Technology companies have cut more than 34,000 jobs since the beginning of the year as they reorganize workforces to invest in new areas, such as generative AI, and drive their next phases of growth.

Microsoft, Snap, eBay and PayPal have eliminated hundreds — in some cases, thousands — of roles since the beginning of January, according to the website Layoffs.fyi, which monitors attrition in the sector. In total, 138 technology companies laid off employees this year.

The losses are smaller than at the beginning of 2023, when large technology groups, including Meta, Amazon and Microsoft, cut positions after over-investing during the pandemic. 263,000 jobs were lost in the sector last year, data from Layoffs.fyi showed.

Analysts estimate that the latest wave of layoffs is the result of efforts to reorganize resources for investment in new areas, especially AI, at the same time that companies seek to demonstrate continued focus on controlling expenses for shareholders.

Tech companies have found they have “a lot of dead wood” in their workforce and “if they had a leaner organization, they could do more,” said Brent Thill, an analyst at Jefferies. “The mass layoffs will continue and could get worse. They have become contagious.”

Companies are reassessing priority areas for investment and cutting positions in expensive, non-core divisions, said Daniel Keum, associate professor of management at Columbia Business School. This was the case with Amazon’s Twitch video streaming platform, which eliminated hundreds of jobs in 2024.

In addition to Amazon, Microsoft, Meta, Alphabet (Google’s parent company) and Spotify are among the companies that have also signaled plans to achieve this balance this year.

“We need to become more efficient and take the focus off some of the existing things, but we also need to invest in some other new things,” Spotify CEO Daniel Ek said this month.

Last year’s widespread cost reduction followed the realization that the shift to more digital lifestyles did not last beyond the pandemic, a period in which companies began a massive hiring spree.

“Anyone who works in technology or games right now is worried about layoffs to some degree, whether it’s for themselves or someone they know,” said Autumn Mitchell, an employee at ZeniMax, Microsoft’s video game subsidiary. “You see a company announce layoffs and think ‘Here we go, what’s next next week?'”

The beginning of the year, when companies lay out their plans for the next 12 months, is often a time of disproportionate job cuts, Keum said.

This year’s losses appeared more strategic than seasonal: 2022 and 2023 saw “right-sizing” of the post-pandemic workforce, but the cuts in 2024 came alongside “active hiring,” Keum added.

Meta, which has cut more than 20,000 jobs since the end of 2022 — while investors complained about the billions of dollars spent on building a “metaverse” — said this month that net employee additions for the year would be “minimal” even with “significant investments” in generative AI, which would include talent retention.

Meanwhile, enterprise software company SAP revealed a “company-wide transformation” in January that will include cutting around 8,000 jobs as the company increases its focus on AI. Employee numbers would be “similar to current levels” by the end of 2024, the company said. SAP’s announcement “demonstrates that this isn’t a net job loss; it’s more of a reskilling,” said Derrick Wood, an analyst at TD Cowen.

Snap, for its part, announced this month that it would cut a tenth of its global workforce as it struggles to recover from a slump in digital advertising. But the company’s example was a response to an “existential crisis about whether they will be here in two years or so,” Keum said.

“When we talk about Amazon, Meta, Google, it’s a very different type of dismissal.”