Why tech is laying off workers (again) with all their might
These restructurings can be explained by a desire to reallocate resources towards the development of artificial intelligence, but also by a race for ever greater profitability.
Microsoft, Snap, eBay, Google, PayPal… In recent weeks, tech companies have announced serial layoffs. Latest? Cisco, which is cutting 5% of its 85,000 jobs. The company is nevertheless profitable. Its profits amounted to $2.6 billion in the last quarter of 2023. However, they are down 5%, compared to the same period a year earlier. Chuck Robbins, CEO of Cisco, presents these job cuts as a way “ align investments with future growth opportunities “.
For more than a year, waves of layoffs have become a norm in the sector. In 2023, 1,191 companies laid off 262,735 people, reports the site Layoff.fyi, which lists layoffs since 2020. At the start of the year, 154 companies laid off 39,496 people in 2024. But the figures remain lower than those announced during the massacre of 2023.
Everything is fine, but we still lay off
However, these companies are, for the most part, showing good results. This is the case in particular of Microsoft, which we cannot really say is in difficulty with a record income of 62 billion dollars (57.6 billion euros) in the last quarter of 2023. The giant has, however, announced at the start of the year the layoffs of 1,900 people at Activision Blizzard (whose acquisition was recently finalized) and Xbox. But at the same time, the company is planning investments, particularly in generative artificial intelligence.
To justify these departures, companies have abandoned the refrain of last year – “the macroeconomic climate is not favorable” or even “it’s the rebound effect following overly optimistic post-Covid hiring” – with a new refrain . Namely: restructure and reallocate resources to embrace the wave of artificial intelligence.
Removals affecting management functions
“These cuts mainly concern management, sales, marketing functions, etc.,” notes Stéphane Distinguin, partner and founder of EY Fabernovel. These are functions that we can imagine could be automated by AI. These companies also have an interest in promoting the productivity gains made possible by artificial intelligence since that is also what they sell. But it is above all because it seems legitimate to question these functions when we reorganize ourselves.”
He believes the sector is reaching the end of one cycle and the start of a new one. Cuts in support functions for greater efficiency: this is notably the justification for Snap, which recently eliminated 500 positions to reduce hierarchical levels.
A less fierce war for talent
Stéphane Distinguin also notes a change in the job market. “ For a very long time, the Gafam accumulated as much talent as they could. They recruited en masse to prevent interesting profiles from working elsewhere. They are no longer in this war for talent, except perhaps for expert profiles in artificial intelligence »
In the columns of‘Axios, Tigran Sloyan, co-founder of the technical skills platform CodeSignal, explains that companies are redirecting their resources to spend more on recruiting engineers with highly sought-after skills. According to a CompTIA report, 10% of ads published in the tech sector are for positions requiring artificial intelligence skills.
Furthermore, Gafam like other tech companies are making cuts to please investors, observe various analysts. These companies are profitable, but aim to be even more so. Meta and Apple recently announced that they are distributing dividends. Which they weren’t used to doing until then. This pressure for profitability also concerns the entire tech sector, including startups.
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