Focused cuts, fewer layers: Tech industry layoffs enter new phase

By Mike Isaac

Last year, Mark Zuckerberg declared 2023 to be a “year of efficiency.” His company, Meta, soon laid off a third of its employees. Amazon, Google and Microsoft also cut tens of thousands of workers.
 

Their worlds did not stop. Not only that, the companies were rewarded. Their stock prices soared. Some divisions were more productive. And the companies — including X, formerly known as Twitter, which has chopped nearly 80 percent of its staff since late 2022 — continued operating.

Other chief executives took notice. And a month into 2024, tech companies have entered a new phase of cost cutting.

After last year’s widespread layoffs, the largest firms — including Amazon, Google and Microsoft — have in recent weeks made smaller, targeted job trims while focusing on fewer projects and shifting resources to key products such as artificial intelligence. Some tech start-ups — such as Flexport, Bolt and Brex — have slashed more deeply to stave off potential extinction. The mandate from the top is the same: Do more with less.

“There are three basic buckets of layoffs we’re seeing,” said Nabeel Hyatt, a general partner at the venture capital firm Spark Capital, which invests in tech companies. “Big, fat tech oligopolies looking for more growth and profit; there are the medium-size companies that over-hired during boom times; and there are the smaller start-ups that are just trying to gain runway to survive.”

The new layoffs are the latest correction to years of a booming global economy and near-zero interest rates, which gave tech companies the ability to throw off gobs of cash to attract top talent in the pandemic. Many of the companies hired tens of thousands of new workers during that time to keep up with digital demand.The past couple of years have forced tech executives to think differently. After lockdowns lifted and people ventured back out into the world, use of tech products shrank compared with pandemic highs. More than 1,000 tech companies eliminated upward of 260,000 jobs in 2023, according to data compiled by Layoffs.fyi, which catalogs job cuts across the tech industry.

Slashing tech work forces would have been anathema in Silicon Valley just a few years ago. Tech culture has long been one in which a manager’s status was determined by how many people reported to him or her and how effectively a company countered competitors’ recruitment efforts. Tech executives often viewed attracting the next generation of computer scientists as a full-contact sport.

But now the stigma of layoffs has dissipated. More executives at tech companies have admitted that they over-hired in the pandemic. The largest companies are making strategic cuts to areas where they plan to invest less and where certain types of jobs are no longer needed. Smaller companies that could easily raise capital just a few years ago are cutting to stay afloat. In the first 30 days of this year, 25,000 layoffs occurred across roughly 100 tech companies, according to Layoffs.fyi. Microsoft, Google, Apple, Meta and Amazon are set to give more insight into the state of the industry when they publish quarterly financial statements this week.

Meta, which owns Facebook and Instagram, exemplifies the arc of layoffs. Last year, Zuckerberg cut what he called “managers managing managers.” This year, the company has been more targeted with its trims.

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