How the bubble of the Big Tech epidemic burst

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In the year In January 2021, Microsoft CEO Satya Nadella highlighted how the first year of the pandemic has led to a dramatic shift to online services, benefiting the company in the process. “What we have seen in the last year is the second wave of digital transformation that is sweeping every company and every industry,” he said.

Two years later, the situation seems to be very strong. Microsoft this week said it plans to lay off 10,000 workers as businesses rethink their pandemic-era digital spending and face broader economic uncertainty. Microsoft customers, Nadella said, are now trying to “do more with less.”

Microsoft isn’t the only company experiencing such dramatic change. Days later, Google-parent The company said Alphabet plans to cut about 12,000 jobs, or more than 6% of its workforce.

In the past three months, Amazon, Google, Microsoft and Facebook parent Meta have announced plans to lay off more than 50,000 workers. In the early days of the pandemic, tech giants are rapidly expanding to meet the needs of countless families who live, shop and work online. At the time, many tech leaders seemed to expect growth to continue unabated.

In the year In September 2022, Amazon ( AMZN ) more than doubled its corporate workforce compared to the same month in 2019, hiring more than half a million more workers and vastly expanding its warehouse footprint. Meta nearly doubled its headcount between March 2020 and September last year. Microsoft ( MSFT ) and Google ( GOOGL GOOGLE ) have hired thousands more workers, while other tech firms such as Salesforce ( CRM ), Snap ( SNAP ) and Twitter have announced layoffs in recent weeks.

But many of those same leaders seem to be mistaking how much the epidemic will continue to grow once people return to their offline lives.

In recent months, fears of higher interest rates, inflation and a recession that could lead to a pullback in advertising and consumer spending have weighed on tech companies’ profits and stock prices. Wall Street analysts now project single-digit earnings growth for Google, Microsoft and Amazon in the all-important December quarter, and will discount Refinitive estimates when Meta and Apple report earnings in the coming weeks.

In most cases, recent layoffs are a relatively small percentage of each company’s total headcount, essentially wiping out the final year for some but leaving tens or in some cases hundreds of thousands of remaining workers. But it adds to the lives of many workers who are now left scrambling for new jobs after their employers exited a period of seemingly limitless growth.

“They went from being on top of the world to making tough decisions,” said Scott Kessler, head of technology, media and telecommunications at Third Bridge Investments. “To see this incredible reversal of fortunes…not just the scale of these moves, but the speed at which they were played. You’ve seen companies make the wrong strategic decision at the wrong time.

Apple ( AAPL ) is the first major tech company to have yet to announce layoffs, even as the iPhone maker has announced hiring freezes in all areas except research and development. Apple ( AAPL ) grew its workforce by 20% from 2019 to last year, which is slower than some of its peers.

“They’ve taken a more thoughtful approach to hiring and managing the company in general,” Kessler said.

Tech CEOs from meta’s Mark Zuckerberg to sales force’s Marc Benioff have blamed themselves for over-hiring during the pandemic and reading how demand for their products will slow after the easing of Covid-19 restrictions. Pichai blamed Alphabet’s cuts on Friday and said he plans to return the company’s focus to its core business and “higher priorities.”

“The fact that these changes will affect the lives of Googlers weighs heavily on me, and I take full responsibility for the decisions that got us here,” Pichai said in an email to employees posted Friday on the company’s website.

Especially none of the CEOs of Big Tech companies Now overseeing the layoffs appears to have made no change in pay or rank.

Tech layoff announcements are likely to continue during the next earnings season, Keisler said, amid continued economic warning signs. And even companies that haven’t yet felt the pain may follow their peers’ lead in cutting their workforces.

“I think there is an element [some companies saying]”We may not see it right now, but all these big companies, companies that we love, that we know, that we respect, are taking these kinds of steps, so maybe we should be thinking and acting like that,” Kessler said.

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