Amazon, Meta, Microsoft & Co. are making cuts: US tech giants are downsizing on a large scale – these are the reasons

• Tech giants are shedding jobs on a large scale
• Staff surplus from the Corona crisis will be reduced
• Inflation and recession concerns

Tech companies have been among the biggest stock market stars for years. Stocks like Microsoft, Amazon, Alphabet, and Meta have provided investors with strong returns for some time. Many of these companies peaked during the COVID-19 pandemic, when demand for internet services and tech products increased in the context of lockdowns and increased activity at home. During this time, Microsoft & Co. not only significantly expanded their business activities, but also significantly increased the number of employees. But the hope of many tech companies that the high level of business could become the new normal has not been fulfilled. Now tens of thousands of employees worldwide are getting rid of their jobs.

Recession fears prompt austerity measures

It is particularly the policy of the central banks that prompts many tech companies to save. After the monetary watchdogs kept interest rates low for years and made it possible for technology companies to refinance cheaply, the situation has now changed fundamentally. In view of the high inflation rates, central banks around the world have increased their key interest rates. But the fight against high consumer prices not only brings with it higher interest rates, if the monetary watchdogs overstrain their hawkish policies, they risk a weakening of the economy and, in the worst case, even a recession.

Technology companies are concerned about the prospect of a significant slowdown or even contraction in economic growth. Accordingly, these companies, spoiled by growth in every respect, are now making cutbacks and, among other things, parting ways with many employees.


The Internet company Amazon wants to cut 18,000 jobs. Amazon has never decimated its headcount to this extent in its corporate history, but the online shopping boom during the pandemic has arguably enticed the company to increase its workforce more than can be justified at this point. Employees from loss-making business areas, such as the device division for the Echo smart speaker and the Alexa language assistant program, are particularly affected by layoffs.


The wave of layoffs that is rolling through the tech landscape has also reached the Windows manufacturer Microsoft. By the end of March, 10,000 jobs will be available here – around five percent of the workforce. It is not yet clear which areas of the group are particularly affected, but there is no question for Microsoft that the job cuts are necessary: ​​”We have to bring our cost structure into line with our sales,” says Microsoft boss Satya Nadella.


There was also a recent cut-throat among employees on Twitter. After the $44 billion takeover of the company by Tesla boss Elon Musk plowed through the workforce and laid off around half of the around 7,500 employees to date. Musk wants to put the loss-making group on course and make it profitable. The wave of layoffs at Twitter is only partly due to an expected weaker business development in times of recession: the new boss was convinced some time ago that Twitter was pursuing a misguided personnel policy.


The Alphabet Group, the mother of the search engine giant Google, now wants to get rid of around 12,000 employees. The group’s management attributes the fact that around six percent of the workforce is being laid off to increasing frugality among advertising customers – advertising revenues make up the largest part of Google’s income. CEO Sundar Pichai wants to focus on the core business, the workforce should be adapted to the central priorities of the group, the group manager said. This includes the AI ​​area, which has become increasingly important for Google in recent years.

meta platforms

The Facebook mother Meta Platforms is also affected by the job quake in the tech industry. For the first time since the company was founded, around 11,000 employees will lose their jobs here, which company founder Mark Zuckerberg justified in particular by overestimating the online boom at the beginning of the pandemic and therefore increasing investments. In the meantime, however, the Internet business has returned to earlier trends. Concerns about the economy and increasing competition are also weighing on Meta, the Reality Labs division, in which work is being done on the Metaverse and which is considered the future division of the company, is making billions in losses.


The chip giant Intel is also affected by drastic job cuts. It is unclear how many employees the semiconductor group intends to lay off, but the media are speculating that the workforce will be reduced by around twenty percent. This could save Intel billions of dollars in personnel costs and at least compensate for part of the sales slump in the PC business.


Inflation and recession concerns have also prompted Uber competitor Lyft to lay off a large chunk of its workforce. 13 percent of the employees have to go, and no new employees have been hired since last summer. “We are not immune to the realities of inflation and economic downturn,” company founders John Zimmer and Logan Green wrote in a memo to employees.


Meanwhile, 6,000 jobs are to be cut at computer and printer manufacturer HP. The US company is taking into account the weak demand in the PC segment in particular, which is why HP has prescribed a massive savings program for itself. In the summer, star investor Warren Buffett gave HP shares a big boost. The Berkshire Hathaway boss took advantage of the significantly lower valuation of HP shares. Since then, however, the share has lost value again significantly in view of the difficult economic conditions – possibly a reason for the savings efforts at HP.


Despite the lack of semiconductors in many sectors, memory chip manufacturers like Micron cannot escape the current difficult market conditions. The company suffers in particular from its specialization in chips for smartphones, laptops and PCs – consumers are currently reluctant to buy these same devices in view of the high rise in consumer prices. High inventory levels at device manufacturers are the result – a lack of new orders at corporations like Micron is the consequence. The group is questioning the return to profitability in 2023 and instead wants to react with cost reductions, which will also have an impact on the personnel situation at Micron: around ten percent of the workforce will have to go.


The US crypto exchange Coinbase suffered from several developments. The crypto winter hit the company hard, with sales and profits plummeting. In the summer, the company responded to the slump in the crypto market by cutting jobs and laying off around 18 percent of its employees, with around 1,100 employees to go.

However, the aversion of many investors towards risky investments such as crypto currencies and the bad news for the crypto industry were not the only reason for this decision: Coinbase is also struggling with a cost explosion that is burdening many tech companies. So the company recently put another 950 jobs up for grabs and wants to part with 20 percent of the remaining employees.


Meanwhile, every tenth job at the US software manufacturer Salesforce falls victim to the cutbacks. This means that 8,000 of the approximately 79,000 employees worldwide will have to leave the company. CEO and co-founder Marc Benioff cited the rationale for the restructuring process as the company’s customers are currently taking a closer look before making purchasing decisions. Salesforce hired too many people given the current downturn during the corona pandemic, when business picked up significantly, says Benioff self-critically.


As the last major tech group for the time being, the music streaming market leader Spotify has also resorted to layoffs. Here, too, it was the massive increase in the number of employees during the corona pandemic that is now falling on the company’s feet. 600 employees now have to leave the group, which corresponds to around six percent of the entire workforce. Founder and boss Daniel Ek wants to make Spotify more efficient in this way: “Looking back, I was too ambitious with investments that overtook our sales growth,” he explained.

Stripe, DoorDash, Roku, Cisco, and Seagate

The payment service provider Stripe wants to get by with 14 percent fewer employees in the future, while 1,250 administrative jobs will be eliminated at DoorDash. The hard drive manufacturer Seagate is also reacting and, according to its own statements, is cutting 3,000 jobs around eight percent of the workforce. At Cisco, meanwhile, five percent of employees are being laid off. The Netflix competitor Roku also draws the consequences of the “current economic conditions”: 200 employees – and thus five percent of the group’s employees – have to go.

Job cuts will initially entail costs

Even if the job cuts in the tech industry help companies to reduce costs in the medium to long term, there are initially additional financial costs associated with job cuts. Salesforce, for example, put the one-off costs at $1.4 to $2.1 billion. At Microsoft, the costs resulting from layoffs and severance payments are estimated at 1.2 billion US dollars. Other tech companies will probably first have to post balance sheet burdens before the cost-cutting measures for personnel have a positive impact on the business figures.

Many experts see the current measures taken by the tech giants as necessary. For example, Mark Mahaney from asset manager Evercore ISI rated the downsizing at Google as the right step. Speaking to Yahoo Finance Live about the job cuts at Microsoft, Dan Ives, who works as an investment manager at Wedbush, told Yahoo Finance Live: “This is the moment Nadella and Microsoft pull the bandage off and we’re seeing it across the tech industry. This Companies were spending the money like 1980s rock stars at a rate that was unsustainable.”

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